United we stand: the anti-competitive implications of media ownership of athletic teams in Great Britain.

• Author: Bush, Jonathan E.

ABSTRACT

This Note analyzes the increasing integration of the sports and broadcasting industries and the British framework for evaluating the permissibility of transactions furthering such integration. In the context of the recent attempted takeover of British football club Manchester United by Rupert Murdoch's British Sky Broadcasting, the Note examines how the Monopolies and Mergers Commission (MMC) was uniquely poised to fully consider the ramifications of this developing nexus of sports and media and evaluates the significance of the MMC's decision on the future of both industries.

A diverse array of domestic, international, political, and economic issues and implications face any court or administrative agency confronted with a media/sports merger. Although the MMC ultimately recommended that the British Sky Broadcasting-Manchester United merger be prohibited, it will only be determined through the united consideration of such an array of issues whether the vertical integration of broadcasting and professional athletics is merely the inevitable result of a growing trend or a legitimate cause of concern for free competition in sports and media worldwide.

1. INTRODUCTION

   In the sport of football, or soccer in the United States, the last line of defense is the sweeper, a free, roaming player who plays behind all the defenders except the goalkeeper.(1) The sweeper has a unique perspective; he can observe developing attacks from a withdrawn position, guide and caution his fellow defenders accordingly, and when necessary, step in to halt any scoring threat that breaks through the back line.(2) The Monopolies and Mergers Commission (MMC or Commission), one of three divisions of the British government's antitrust authority, may have functioned as the most important sweeper in English football history when it stymied an offensive assault that threatened the future of the sport in Great Britain.(3)

   Administrative agencies such as the MMC are frequently confronted with escalating economic trends that, if left unchecked, could change the face of an industry forever. Rarely, however, does such an agency have the ability to alter such a trend through one decision. The MMC recently possessed both the opportunity and the ability to mold the current interrelation of two separate industries--broadcasting and professional athletics--and guide their development for years to come. However, it remains to be seen whether the MMC's action successfully leveled the competitive playing field in British sports and broadcasting or accidentally put the ball in the back of its own net.

   1. The Convergence of the Sports and Broadcasting Industries

      Although some believe the impending convergence of broadcasting and professional athletics has potentially serious anti-competitive implications, others view the two industries as natural partners, dependent on each other for continued profitability.(4) The business of professional sports is one of the most visible and lucrative industries on the planet, due in large part to the ever-increasing media coverage it receives.(5) Athletes currently receive greater exposure, demand greater attention, and incite greater adulation than ever before.(6) New stadiums single-handedly revitalize crumbling urban areas.(7) Sports stars, voluntarily or involuntarily, become role models for children from a diversity of backgrounds. Athletes earn hundreds of millions of dollars in salaries(8) and even more for their teams and the companies whose products they endorse.

      Media broadcasting conglomerates are fast becoming similarly omnipotent and ubiquitous.(9) Broadcasters utilize the latest technology to bring the public hundreds of specialized digital and satellite channels and instantaneous information services(10) while maintaining a stranglehold on society's traditional and preeminent source of news and entertainment--terrestrial television.(11) A large portion of the recent surge in the profitability of media ventures can be directly traced to the almost guaranteed audience for professional sports.(12)

      As a result, sports and media industries have grown to be inextricably linked and remain heavily dependent on one another for their respective livelihoods.(13) The structure and rules of sporting events are already dictated to a large degree by television coverage: (1) live events are periodically interrupted to provide television commercial time, (2) the prevalence of night games has increased to maximize viewing audiences, and (3) the market price for star athletes is a clear function of ever-escalating broadcast rights revenues.(14) Media groups are at least as financially dependent on sports, as evidenced by the exorbitant sums of money paid for the broadcasting rights to professional athletic competitions, the emergence of total sports channels, and the price paid by advertisers for a thirty-second time slot during worldwide televised championship events.(15) As a result of this apparent codependency, the vertical integration of sports teams and broadcasting providers seems to be a rational solution to preserving the vitality of both industries.(16)

   2. The Anti-Competitive Effect of Vertical Integration

      From an alternative perspective, the extensive intermingling of broadcasting and athletics is thought to pose ominous prospects for the long-term future of both industries. Perhaps the most recognizable and troubling effect of permitting media ownership of athletic teams is the anti-competitive impact such a vertical integration may have on participants in each industry.(17) This concern is especially exacerbated in the professional athletics industry, in which competition is not merely an idealistic goal but its very essence.

      A sport such as football is not comprised of programs offered by individual entities that consumers may freely choose between in the marketplace.(18) Nor are the individual teams themselves truly competing entities operating in a free market.(19) The products being sold--the games--are the result of two teams' collaborative, yet adversarial efforts.(20) Success on the field is each team's ultimate goal in order to maintain profits through spectators' repeat purchases of such products.(21) However, a league of such teams must establish an organized series of games with a winner declared according to the rules of the sport and not the rules of the market.(22)

      Thus, the business of professional sports is unlike all other industries, in that competition is not the means to the end, but the end itself. Each team seeks to become as strong, skilled, and successful as possible in order to prevail over all others. Yet, the aggregate effect of such behavior is to increase the overall level of competition and, with it, the number of spectators paying admission.

      With the onset of recent technological advances, the primary profit source in sports has shifted from the limited audiences attending the matches to the unlimited number of viewers at home, watching on television.(23) To maximize these profits, most sports leagues have chosen to negotiate broadcasting rights arrangements collectively and sell such rights to the highest bidder.(24)

      As the live transmission of sporting events to large audiences produces so much of the business value of sports (tickets, salaries, advertising, merchandizing, etc.), the professional sports industry has become especially susceptible to the external influence of those who provide its greatest revenue--the broadcasters. While advances in technology have made such interaction inevitable, an increased cause for concern arises in both the sports and broadcasting industries when these previously external influences "internalize" themselves by purchasing the individual teams and use them as leverage in a separate market--sports broadcasting.

      Not only may the substantial concentration of market power in a single broadcasting entity lead to dominance in the sports broadcasting market,(25) but it may also create a general coercive power over an entire sport in terms of organization, competition and public accessibility, especially when a dominant broadcaster acquires a similarly successful professional sports franchise.(26) As the incentive for such acquisitions has increased,(27) the fear of such dominance has inspired a tremendous controversy concerning the future interrelation of broadcasters and professional sports teams.

   3. British Sky Broadcasting's Attempted Takeover of Manchester United

      The opportunity to examine and challenge the trend towards total integration of sports and media arose recently in Great Britain when on October 29, 1998, the most expensive takeover deal in the history of sports was put on hold pending review by the MMC.(28) Media mogul Rupert Murdoch sought to purchase the British football club Manchester United (United) through his satellite television company, British Sky Broadcasting (Sky or BSkyB).(29) Sky currently owns the broadcast rights to the English Premier League,(30) the top professional level of English football and the league of which United is the perennial champion.(31) Although United is the top British team and one of the most popular and highly successful football clubs worldwide.(32) Murdoch's 625 million [pounds sterling] bid was extraordinary, setting the record for a sports franchise.(33) While United would clearly have benefited from such a deal, the takeover created intense public outrage throughout the nation (most remarkably among United's own fans).(34)

      Upon recommendation from the Office of Fair Trading (OFT) and the subsequent approval of the Secretary of State for Trade and Industry, the United matter was referred to the MMC for an investigation of its anti-competitive effects. The MMC ultimately concluded that Sky's purchase of United should be prohibited, based on the resulting market power increase to Sky from acquiring United's football broadcast rights for pay television.(35) The Secretary of...