By Eugenie Buckley*

Football Queensland is appealing a decision by the Australian Competition & Consumer Commission (ACCC) that FQ says will lead to higher playing costs and dwindling participation rates, and may have wide-reaching consequences that could cost Australian sports organisations millions.

 In December 2011, the ACCC revoked a statutory protection for FQ’s licensing program that had existed since 2008 and delivered approximately eight percent of FQ’s distributable income, which provides funding for the delivery of statewide support services for the code.

 The matter returned to court this week as FQ argues the ACCC’s revocation of the protection meant they had to increase registration fees to recoup at least some of the potentially lost income and that such action could have a devastating impact on player participation rates. The 2012 FQ player participation numbers show a drop of some 10 percent since last year, the worst such figure ever recorded by FQ, and is advised that this drop in participation is directly attributable to the ACCC forced increase in fees.

 It has become clear that if successful against FQ, the ACCC has an intention to take more widespread action against all sporting organisations operating licensing programs that may be subject to third line forcing legislation. The sports industry now awaits the outcome of FQ’s appeal with interest.

Here is a summary of the case so far…

Football Queensland Licensing Scheme

Football Queensland (FQ) is a not for profit organisation that is responsible for the administration of football (soccer) in Queensland, including the sanctioning and conduct of football competitions. It is a member federation of Football Federation Australia and has 70,000 registered male and female football players.

Like most sports, FQ has a teamwear or apparel licensing scheme. Any club (or player) participating in an FQ sanctioned competition must only purchase FQ licensed product. There are 12 different suppliers across all price points from Nike and adidas through to Mitre and Attack Sports. Apart from enabling FQ to exercise quality control and financial protections through the licensing of its Q Logo, this scheme is vitally important from an income perspective. Licensing royalties comprise about eight percent of FQ’s distributable income, which is all put back into the community and relied on to administer the game.

The Law

“Third line forcing” is an exclusive dealing and is prohibited outright under the Competition and Consumer Act. Essentially, third line forcing involves the supply of goods or services on the condition that the purchaser acquires goods or services from a particular third party.

Businesses may obtain statutory protection for conduct that risks breaching the third line forcing provisions of the Act by lodging a “notification” with the ACCC. However, the ACCC may revoke a third line forcing Notification at any time where it considers that the likely benefits to the public from the anti-competitive conduct would not outweigh the likely detriment.

ACCC Action

FQ lodged such a third line forcing Notification in 2008 and it has enjoyed statutory protection for its licensing program since that time. However, in December 2011, the ACCC revoked the Notification. The ACCC considered that the teamwear program was resulting in public detriment through reduced competition in the supply of football apparel in Queensland; likely higher prices for teamwear products; and increased administrative and supplier costs than would otherwise be the case. The ACCC was also not satisfied that the teamwear program was an efficient way to generate funds to meet FQ’s objectives, or that FQ’s claimed benefits could not be realised without the teamwear program.

FQ has lodged an appeal with the Competition Tribunal and it understands that FQ was the first sporting body to appeal this ACCC decision on licensing programs.

The Implications for Sport

It is FQ’s view that this action by the ACCC is a conscious change in ACCC policy to now object to licensing programs such as that operated by FQ. The view is supported by a recent ACCC notification to Queensland Rugby League that it will postpone further review of its scheme until the FQ matter is determined.

As programs such as that operated by FQ are widespread across a whole range of sports, the potential loss of  income to sport in Australia would easily reach into the hundreds of millions of dollars.

 * Disclosure: Eugenie Buckley is a Director of Football Queensland.