European Rugby Union’s Heineken Cup competition still faces an uncertain future as English clubs continue to woo clubs from France and Wales into a rival competition with promises of increased revenue from their contract with BT Sport. The possibility of any new set of alternative domestic and European championships succeeding is hamstrung by the realities of the international game, the remit of the International Rugby Board (IRB), and European competition and Intellectual Property (IP) law.
Frustrated by their inability to woo the French clubs due to the opposition of the French Rugby Union (FRU), the English clubs are trying to exploit dissatisfaction among the Welsh regional sides over the financial arrangements between them and their governing body, the WRU. The English clubs hope the Welsh Regions will abandon Europe by appealing to the historical rivalries of an amateur golden age as the basis for a new English-Welsh domestic competition. If the Welsh regions were to opt for this alternative it would destroy the current RaboDirect Pro12 League leaving Irish, Scottish and Italian clubs without any meaningful competition. While the top Irish and Welsh teams attract attendances not dissimilar to the top English sides, the game in Scotland and Italy is less successful. In the absence of Welsh clubs it is difficult to see how an eight team league would be commercially viable (particularly with the costs of travel to Italy now more heavily concentrated). In the short-run good players in these countries would migrate to English, Welsh and French teams, while in the longer run the playing and supporter base in these fringe countries would almost certainly substantially decline to the detriment of both their international and amateur games. The IRB, with its mandate to promote Rugby Union all over the world, would have real difficulty in sanctioning any competition which would result in this outcome.
It is this mandate which explains why both the Italian and Scottish teams are guaranteed participation in the Heineken Cup, and proportionally more Irish and Welsh teams (three each) than French and English (6 each). This arrangement also explains why the aggregate share of the 10 RaboDirect Pro 12 teams is greater than the French or English league share, although it is not clear that the allocation per participant is distorted. The majority of the funding (85%) is divided equally between all the participants, with 15% allocated by results, which at present favour the Irish and French. The English Premiership claim is that their larger market generates more of the revenue, but this is akin to arguing that Aston Villa should be allocated more money than Hull FC since the West Midlands conurbation of 3.7 million is larger than Hull at 0.28 million. The tension between the Premierships and the ERC therefore is less about fairness, and more about the impact of withdrawing money and exposure from the fringes of European rugby.
So could any new arrangement proceed without the permission of the IRB, and for that matter the WRU, the FRU and potentially the RFU? Or to put it another way, who ‘owns’ Rugby Union? While neither Rugby Union nor Rugby League appear to be trademarks under UK trademark law, the International Rugby Board is a registered trademark, and therefore the IRB is likely to argue that it owns the brand. Given that the IRB is a registered trademark, it is likely that any such new competition would face challenges over potential intellectual property issues, including trademarks. Rugby unions do not shy away from conflict where their branding is concerned, as demonstrated in 2002 when the RFU challenged clothing produced by Cotton Traders, which included the red rose emblem. What potentially may be more likely could be litigation against those clubs / regions that may set up any future competition, along the lines of ‘passing off’ especially if marks have not been registered, but are used anyway, especially if the IRB were able to claim that their brand or reputation had suffered as a result of any new competition that may arise. Potentially, the only way around this for a breakaway competition is to establish a new variant of the game, much like the breakaway that led to the founding of Rugby League in 1895, or even, perhaps, to convert to Rugby League. But the creation of a new variant would deprive English and Welsh rugby players the chance to play international Rugby Union, the fame of which is both the basis for a player’s personal financial success and indeed, as they always argue, the financial success of the clubs themselves. There are of course a host of other potential issues arising here, including, contractual ones. Such disputes could perceivably stretch into areas including those of replica shirts, the sale of tickets, and sponsorship agreements. All of these necessarily include provisions relating to elements of branding as well as trademarks. The clubs considering ‘breaking away’ may also find that their ability to use brands and registered trademarks are severely curtailed on the basis of their licensing agreements being terminated. It is inconceivable that the IRB will allow breakaway competitions to benefit from existing licensing and IP agreements if they are against the changes. All of these specific IP considerations must also be considered in light of competition law provisions, and treaty articles that encourage the free movement of goods and services, and the prevention of monopolies. Failing to allow breakaway competitions to benefit from established IP rights may fall foul of EU competition provisions, as there is always a tension between IP and competition, and registered trademarks are just one IP right which represent a monopoly in a specific class of trademark.
But the response of the IRB and intellectual property is only one part of the problem. The eight professional clubs in Ireland, Scotland and Italy, and particularly the hugely successful Irish big three, deprived of their right to do business would undoubtedly look to European competition law to argue that they have a legitimate stake in any new arrangement. As in previous cases involving the effect of EU law on sport, the issue is likely to boil down to whether sporting interests should be given precedence over fundamental values of the European internal market, one of which is undistorted competition. If the point were litigated, it could well end up in the European Court of Justice, which is not always sympathetic to special pleading by sporting interests, as the Bosman case showed back in the mid-1990s. Similarly, what accommodation would be made for the clubs in the second tier English Championship who have invested heavily in grounds and players on the basis of potential promotion to the English Premiership if the Welsh teams were to be brought in? Failure to honour the promotion arrangements agreed by the RFU would undoubtedly provoke a similar recourse to the law.
At the heart of English clubs’ concerns is the increased private wealth being invested in French rugby clubs and, as a remedy, it seems they are seeking to wrench a larger share of income from the ERC, the umbrella organisation who run the Heineken Cup, income which the ERC arguably currently manages in the interests of the European game as a whole. However, since the French are as likely to benefit from any redistribution as the English this is unlikely to resolve their real problems.
Professor Cillian Ryan, Dean of Liberal Arts & Sciences and Jean Monnet Chair in European Economics, University of Birmingham, and Kim Barker, Birmingham Law School specialist in intellectual property law.