Racing’s settlement with the OFT nails the sport “governance” myth once and for all

Sports governing bodies like nothing more than to set up “governance” committees in which, under the guise of acting “for the good of the sport”, they make decisions which can have pretty have serious commercial consequences for other participants – usually those who take the commercial risks. The OFT’s proposed settlement of its proceedings against the British Horse Racing Board (BHB) which was announced this week is an important step along the road of exposing this myth forever.

Commentators have so far focused on the fact that the outcome of the settlement is that there will not be a fixture “free for all” and that data will continue to be sold centrally. However, the separation of the governance (or true regulatory function) from the commercial function within the sport and the setting up of a genuinely separate commercial entity to commercialise the content of the BHB database is an extremely important and far reaching application of the principle first enunciated in the Ecclestone case by the European Commission – namely that it is anomalous and anti-competitive for governing bodies to enjoy both a regulatory and a commercial function.

The case confirms something that has become of general competition law relevance, namely that representation on industry bodies is a competition law issue. The Commission has recently published its intentions to look at the representation on music collecting societies, so by now it is becoming clear just how far competition law goes.

And it is right that it goes this far, at least so far as sport is concerned. Risk takers (in this case, race courses and in the case of motor racing, the teams) need far greater representation if their commercial interests are to be protected and investment encouraged. From now on in racing, the race courses will all have shares in the commercial entity and the BHB one share only with no voting power except in very limited circumstances. This is as it should be for what has often held back investment in sport is precisely the lack of representation for commercial risk takers. The barrier to entry that old-style “governance” monopolies created will come down. The only consequence is likely to be that the sport as a whole will benefit.

All sports that currently unite regulatory and commercial functions are in the last chance saloon as a result of the BHB case and must surely be looking anxiously for arguments that “their” sport is different. In making the necessary separation (as they will have to) they should heed the advice from BHB’s lawyers published in its review, that a separation must be “real and not cosmetic”. For unless separation is genuine, competition authorities will not accept that a governance action is not in reality an exercise of profit motivated market power.

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