Irish Competition Authority Decisions

1. This decision concerns a standard sponsorship agreement between Adidas (Ireland) Limited (Adidas) and individual sports personalities which was notified to the Authority on 30 September, 1992. The notification requested a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a certificate, a licence under Section 4 (2).

2. The notification concerns a standard sponsorship agreement between Adidas and well-known individual sports personalities. Under the terms of the agreement Adidas makes various payments to the other party over a period of time and has an exclusive right to provide them with all their footwear and clothing requirements for their sporting activities free of charge. In return Adidas have the right to use photographs in Adidas kit, of the individual for advertising purposes. The duration of the agreements may vary.

3. Adidas is engaged in the production and marketing of sports goods including equipment, clothing and footwear. It is a subsidiary of Adidas AG. The other parties to the arrangements are well-known individual sports personalities.

4. The products involved are sportswear including equipment, clothing and footwear. The relevant market is the market for those products. There are a number of suppliers of such products, most of them located outside the State, which would have similar arrangements with other individuals. Adidas estimated that there are many hundreds of buyers of such products at retail level within the State. They estimated that the total market turnover was [ ].

5. The arrangements involve Adidas sponsoring the individuals concerned in return for the use of their photographs in advertising materials. Specifically Adidas agrees to pay the individual a specified sum in quarterly instalments for the duration of the agreement. In addition Adidas agrees to supply footwear and clothing which is necessary for the pursuit of the individual's sports career. Under clause 5 both parties agree not to disclose details of the agreement at any time in any manner which might injure or cause loss, whether directly or indirectly, to either party. In return Adidas require the use of the individual's photograph for advertising purposes in Irish magazines. They also require photographs of the individual wearing the Adidas kit for circulation to the Irish sports trade. The individual is also required to keep the footwear clean and to display the three stripes ( Adidas trademark) prominently when playing. The individual may also be required to make personal apearances at major Irish stores for a minimum guaranteed fee. The duration of the agreements varies between one and five years.

(e) Submissions by the Parties

6. Adidas advanced a number of arguments in support of their request for a certificate. They claimed, for example, that the agreement did not so much prevent, restrict or distort competition as facilitate the 'establishment of more successful " sports stars" this increasing the number of buyers in the relevant market'. They stated that there were a high number of competitors in both the supply and the demand market and this number would not be significantly reduced as a result of the agreement. In addition Adidas claimed that the agreement allowed for the creation and maintenance of competitors in the market as it did not restrict sports federations or sportsmen from using other sponsors. They also claimed that the individual sports people may not be undertakings. They argued that, for exmple, amateur sports stars cannot be described as being engaged for gain while professional soccer players may still only be employees. A number of arguments were also advanced in support of the request for a licence but these are not considered here.

7. Section 4 (1) of the Competition Act, 1991, prohibits and renders void all agreements between undertakings which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State.

8. Section 3 (1) of the Competition Act defines an undertaking as ´a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.' Adidas is engaged for gain in the production and distribution of sportswear and is therefore an undertaking. Adidas have argued that the individual sports people who are parties to the agreement may not be undertakings. The Authority sees little merit in this argument. By virtue of this agreement the individuals receive payments from Adidas in return for participating in the promotion of its products. Regardless of the individual's status as a sports personality, the Authority regards such activity as the provision of services for gain, and they are therefore undertakings. The notified arrangements constitute an agreement between undertakings. The relevant geographic market is the State.

9. The Authority believes that the notified arrangements do not prevent, restrict or distort competition. They do not prevent any other firm from selling sportswear in Ireland nor from marketing its sportswear. None of the provisions in the notified terms and conditions offend against Section 4 (1).

10. In the opinion of the Authority Adidas (Ireland) Limited and the individual sports personalities are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified arrangements constituted an agreement between undertakings. In the Authority's opinion the arrangements did not have, as their object or effect, the prevention, restriction or distortion of competition within the State or any part of the State.

11. The Competition Authority has issued the following certificate:

The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, the standard sponsorship agreement between Adidas (Ireland) Limited and the individual sports personalities, (notification no. CA/426/92E), notified on 30 September 1992, under Section 7, does not offend against section 4(1) of the Competition Act.

For the Competition Authority

Patrick Massey

Member

12 September, 1995.