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  • Writer's pictureJoseph Pious

Implementation of FFAR and AIFF Football Agent Regulations; Where does Indian Competition Law stand? Part 2

What constitutes an ‘enterprise’?

In its presented arguments, the Board of Control for Cricket in India (BCCI) asserted that it operates as a not-for-profit society, duly registered under the Tamil Nadu Societies Registration Act, 1975, with the primary goal of promoting the sport of cricket in India. BCCI emphasised that it does not partake in commercial activities for profit generation and, as such, should not be equated with business organisations. Consequently, BCCI contended that it does not fall within the definition of an 'enterprise' as outlined in Section 2(h) of the Act. Accordingly, BCCI argued that Section 4 of the Act, which pertains to abuse of dominance, should not be applicable to its activities.


Dealing with issue, the commission noted that, under Section 2(h) of the Act, “enterprise means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind…”[1]. The term “person” is explicitly defined in Section 2(l) (xviii) of the Act to encompass entities such as “a cooperative society registered under any law relating to cooperative societies”[2]. Consequently, the definition of 'enterprise' is sufficiently broad to encompass any economic activity undertaken by an entity. Under this definition, an entity engaged in activities related to the production, storage, supply, distribution, acquisition, or control of goods, or the provision of services qualifies as an enterprise. The decisive factor for categorising an activity as economic is its operation within a market with identifiable buyers and sellers.


The Commission hence observed that the Board of Control for Cricket in India (BCCI) is a society registered under the Tamil Nadu Societies Registration Act, 1975, thereby it qualifies as a 'person.' BCCI, a full member of the International Cricket Council (ICC), was established with the objective of promoting cricket in India. According to its Memorandum of Association, BCCI is mandated to oversee the game of cricket in India and make decisions on various matters, including women's cricket, referred by any of its member associations in India. Beyond its role as the custodian of cricket in India, BCCI also organises various cricket matches and tournaments, thereby generating income.


While sports federations may not necessarily aim for profit, the classification as an enterprise is not solely contingent on profit motives. The crucial aspect defining the term 'enterprise' is engagement in economic activities outlined in Section 2(h) of the Act. Regardless of profit motives, if an entity is involved in such activities, it qualifies as an enterprise by virtue of its interaction with the market and other alternatives for the relevant product or service. The regulatory functions undertaken by sports federations, such as rule formulation and integrity preservation, do not alter their enterprise status if they are concurrently involved in income-generating economic activities.


The Commission also observed that in cases involving the abuse of dominance, defining the market serves the primary purpose of assessing the level of market power held by the concerned party. This definition aims to establish whether such market power enables the party to operate independent of market forces; influencing competitors, consumers, or the relevant market in its favour. It is crucial that the definition accurately reflects the economic realities of the situation to comprehend the existing competitive constraints within the market.


In accordance with international norms, the Competition Commission of India (CCI) in Dhanraj Pillay v. Hockey India [3] has also made significant note of the proportionality test adopted by the ECJ in the Meca-Medina case [4]. The proportionality test exempts SGBs engaging in ‘purely sporting functions’ from the purview of the Competition Act if it aims to achieve a larger public objective of protecting the integrity of sport in the world. However, if SGBs engage in any “commercial activity having an economic impact”, it would fall within the purview of competition law. Therefore, recognising SGBs as ‘persons’ under the Societies Registration Acts due to their formation as societies, the CCI extends its regulatory powers over SGBs.

 

Extra-territorial Jurisdiction of the Competition Commission of India


Section 32 of the Act empowers the CCI to apply Indian Competition law to foreign entities whose actions have a significant adverse impact on competition in the relevant Indian market. It states that, “the Commission shall, notwithstanding that, (a) an agreement referred to in section 3 has been entered into outside India; or (b) any party to such agreement is outside India; or (c) any enterprise abusing the dominant position is outside India… have power to inquire into such agreement or abuse of dominant position or combination if such agreement or dominant position or combination has, or is likely to have, an appreciable adverse effect on competition in the relevant market in India and pass such orders as it may deem fit in accordance with the provisions of this Act” [5].


Section 32 of the Act constitutes a legislative embodiment of the "Effects Doctrine," a departure from the "principle of territoriality" in matters of jurisdiction. Originating in the Gencor Limited v. Commission [6] case in Singapore, the Effects Doctrine permits the application of domestic competition laws to foreign firms or companies registered outside India and domestic entities situated beyond Indian borders. This application is warranted when the conduct or transactions of these entities result in observable effects within the domestic territory. In the context of competition law enforcement, the "nationality" of a firm holds no relevance under the Effects Doctrine, as it encompasses all firms irrespective of their nationality[7].

 

Implementation of the FFAR and AIFF Football Agent Regulations; a violation of the Competition Act, 2002

The contentious FIFA Football Agent Regulations have repercussions on the players' agent industry on a global scale, encompassing both professional and amateur football, with implications extending to the Indian market. Furthermore, the incorporation of these regulations into national association law, along with their subsequent application and enforcement as AIFF Football Agent Regulations, contravene Section 3 and 4 of the Competition Act, 2002.


The term ‘person’ is defined under section 2(l)(v) of the Act to also include an “association of persons or a body of individuals, whether incorporated or not, in India or outside India” [8]. FIFA is an association established under the Swiss Civil Code and AIFF is registered with the Registrar of Societies, Mumbai, under the Societies Registration Act, 1860. FIFA and AIFF are entities carrying out an ‘economic activity’, to be understood as regulating any activity consisting of offering goods or services against payment. That is, the Agent Regulations are not regulations that purely deal with sporting matters. The contested FFARs undermine the economic autonomy and operational freedom of clubs affiliated with the association in their dealings with agents, who serve as market counterparts. This is attributed to the fact that they compel all consumers of players' agent services to adhere to the same criteria concerning the maximum fees to be agreed upon as given under Article 15.


Simultaneously, the market counterparts, namely players' agents, face limitations on their scope of action, restricting alternative options and impeding their ability to freely engage in competitive negotiations, particularly in determining their fees. The relevant market in this context pertains to the procurement of football players, a service market where players, coaches, and clubs serve as recipients of services, and players' agents operate as service providers.


Hence, both FIFA and AIFF comes under the ambit of ‘enterprises’ within the meaning of Competition Act, 2002. Clubbed with the extra-territorial jurisdiction of the CCI embedded under section 32 of the Act, it cannot be denied that the CCI can exercise its regulatory powers over both FIFA and AIFF in their implementation of the Agent Regulations in India.


Furthermore, while the Agent Regulations articulate objectives such as ensuring contractual stability, promoting young talent, fostering solidarity between elite and grassroots football, and maintaining competitive balance, it is evident that these regulations do not pertain to the inherent nature of sports. Instead, they exclusively address economic activities distinctly separated from sporting objectives. Notably, it can be asserted that the Agent Regulations lack necessity and proportionality as means to achieve the stated objectives, thereby falling outside the scope of Meca-Medina test.


The service fee cap mandated under the FFAR and AIFF Agent Regulations fall within the scope of an ‘agreement’ under the Competition Act, 2002. As per Section 2(b) of the Act, an  “agreement includes any arrangement or understanding or action in concert,— (i) whether or not, such arrangement, understanding or action is formal or in writing; or (ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings” [9].


It is imperative to consider that the provisions of the FFAR have global applicability, encompassing all commercially active football clubs and players. Given that there is no professional football sector outside the purview of FIFA, the market coverage is comprehensive, reaching 100%. Consequently, all entities seeking the services of ‘player agency’ in the Indian market are bound by the fee cap mandates of the FFAR and AIFF Agent Relations. Any football clubs or players engaging agents under terms contrary to those outlined by FIFA or AIFF risk facing sanctions from the Disciplinary and Ethics Committees of FIFA and AIFF.


Conclusion

The Indian football industry is growing, and AIFF is pushing its boundaries for achieving the long-term vision of competing in the World Cup. With the advent of the Indian Super league (ISL), and the promotion-relegation system, club football in India is thriving. However, a peek into the transfer market of club football in India would speak out the reality of remunerations received by the players. AIFF has adopted FFAR’s same percentage cap on the service fee keeping the same standard annual player remuneration at USD 200,000. This threshold categorically eliminates the negotiation powers of agents in India, and thereby restricting competition in the market. A lesser threshold would have made more sense, if AIFF intended to fulfil its stated objectives.


The service fee cap mandated under the FFAR and AIFF Agent Regulations are anti-competitive agreements under section 3 of the Competition Act, 2002. AIFF is the only association for football in India at the national level and in that capacity; FIFA vests it with certain rights and obligations. The author believes that the fee cap agreements are a clear case of abuse of dominance by these enterprises in the relevant market of football where agents act as service providers. Section 19 of the Act empowers the CCI to initiate a suo motu inquiry into specific agreements and the dominant position held by any enterprise [10]. It is high time for the CCI to take action against the implementation of the FFAR and AIFF Agent Regulations in India.


Bibliography

[1] Section 19, Competition Act, 2002


[2] Section 2(b), Competition Act, 2002


[3] [1999] 4 CMLR 971


[4] Jain, A. (2011). Extra‐territorial jurisdiction of Competition Commission of India. Journal of Financial Crime, 19(1), 112–119. doi:10.1108/13590791211190768


[5] 2(l)(v), Competition Act, 2002


[6] Case No. 73 of 2011 of the Competition Commission of India


[7] (2006) ECR I-6991


[8] Section 32, Competition Act, 2002


[9] Section 2(h), Competition Act, 2002


[10] Section 2(l) (xviii), Competition Act, 2002

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