On Friday 12 February, the RFU Council approved a moratorium on relegation from rugby’s Premiership for the 2020-21 season.

Citing the impact of COVID-19, the decision has been taken with the financial stability of the Premiership clubs in mind, with the consequence that the twelfth-placed team will not be relegated this year, though the Championship winner will still be promoted into the Premiership – if they meet the Minimum Standards Criteria for entry.

It is clear that the significant number of cancelled Premiership matches was a significant factor in the decision, with the RFU and Premiership Rugby statement noting that relegation would have been “based on cancellation not on field merit”.

The statement also made clear that recommendations will be considered for changes to the season structures for 2021-22 and beyond for both Premiership and Championship, and noted that:

Holistic new minimum standards on and off the pitch for promotion to the Gallagher Premiership will be developed between now and the end of May 2021 with involvement and approval from Council which will be designed to promote sustainability in the professional game.

However, it continued:

It is likely that any season structures may also include a further moratorium on promotion and relegation for three or four seasons, after which the structure will be subject to further review. 

These structures are to be voted upon before the end of the 2020-21 season.

This article will briefly consider this decision from a legal perspective, considering first the moratorium on relegation and, second, the long-term structural changes proposed.

1. The Relegation Moratorium

The moratorium on relegation is itself unlikely to be legally challengeable. Indeed, the decision has likely been taken in agreement with the Premiership clubs.

The power to make this decision, varying the Premiership Regulations, which provide for relegation,[1] lies with the RFU Council. Premiership Regulation 1.3 provides:

These Regulations may be varied from time to time (whether by way of alteration, addition, deletion or otherwise) by the RFU Council. No changes may be proposed by PRL unless it shall have first consulted with the Clubs. All changes to these Regulations proposed by PRL or the RFU must first be considered by the PGB before they are submitted to the RFU’s Governance Standing Committee for consideration.

It is clear that the decision to suspend relegation has been driven by the clubs, members of Premiership Rugby (PRL), and thus they must have been consulted. It is also a precondition of any such regulatory change that the Professional Game Board (PGB) has the opportunity to consider the proposal. The PGB includes representatives of the RFU, Premiership Rugby, the Rugby Players Association and Championship Clubs.

Assuming that this process has been followed, it is difficult to see how – or more importantly why – a legal challenge would be made against the moratorium.

However, that is not to say that it will not cause any legal difficulties. Ending relegation significantly alters the nature of the competition – a competition which BT Sport pays handsomely for the right to broadcast. BT Sport may well feel that, without the threat of relegation, the Premiership product is not as commercially attractive. Ultimately, they will not be getting what they bargained for. As such, they may seek to reclaim – or withhold – part of the broadcast monies. Sponsors might feel similarly. Nonetheless, such a possibility would depend upon the precise construction of the relevant contract(s).

Regardless of the legalities, it is fair to say that the mid-season moratorium is not particularly satisfactory from a sports governance and integrity perspective. Despite putting regulations in place to deal with the impact of COVID-19 (including the likelihood of relegation) before the start of the season, Premiership Rugby has changed its rules mid-season – as it did last year, to relegate Saracens (discussed here).

Whilst it is understandable that the clubs feel relegation would be unfair in light of the pandemic, it is the mid-season U-turn which makes the decision unsatisfactory. It was perfectly foreseeable before the start of the season on 20 November that matches would be cancelled, hence a system of awarding points was created. The decision to suspend relegation should really have been made then.

Still, this author does have sympathy for the clubs. With the financial challenges posed by COVID-19, the last thing that any of them needs is to be relegated. The integrity of the season was arguably already compromised by the cancellation of matches, and relegation should always be based on on-field performance, wherever possible. As such, the moratorium seems like the right decision – albeit three months late.

2. Long-Term Structural Change

Of greater significance was the line in the statement which said it is “likely that any season structures may also include a further moratorium on promotion and relegation for three or four seasons”. Such a moratorium, temporarily ring-fencing the league, would be more readily challengeable.

Assuming that Saracens secure promotion at the end of this season, the remaining Championship clubs will be locked out of the Premiership for “three or four seasons”. Ambitious sides, such as Ealing Trailfinders, are likely to be aggrieved by such a decision. Should it materialise, Ealing may seek to bring a legal challenge, and would likely argue that the decision breaches competition law.

Should Ealing do so, it would not be the first Championship club to bring a competition law challenge against the RFU. At the end of the 2011-12 season, London Welsh won the Championship and was thus in a position to be promoted to the Premiership. However, it was denied promotion for failing to comply with the Minimum Standards Criteria (the “MSC”) of the RFU for entry into the league. The club challenged that decision, arguing that the MSC were anti-competitive.

Specifically, the case turned upon the application of the primacy of tenure requirement in the MSC, which required clubs to be able to schedule matches freely, to meet the requirements of the broadcaster. London Welsh was denied promotion on this basis, as it was not the primary tenant in its home stadium – notwithstanding that three Premiership teams were themselves not primary tenants. An independent RFU Panel found that the primacy of tenure criterion was contrary to UK competition law, a decision which was confirmed on appeal.

The RFU subsequently reviewed the MSC, though the current version is not publicly available.

A challenge by Ealing (or other Championship clubs) would primarily focus on the decision to ring-fence the league, though it might also challenge the entire structure of the Premiership. As Dr Beverley Williamson pointed out in her 2015 article entitled ‘Premiership Rugby Union: Through the Antitrust Looking Glass’, the league is structured so that 13 clubs (the existing 12 Premiership sides plus Saracens) have (perpetual) P-shares in the league’s commercial body, that they do not lose upon being relegated. This gives the relegated side a significant advantage over the other Championship sides and, as Williamson argues, may itself be susceptible to a competition law challenge.

The cut in RFU funding of the Championship prior to the pandemic further entrenches the Championship clubs’ prejudice. The Premiership is de facto ring-fenced already.

The ring-fencing of the league, formally or otherwise, amounts to a clear restriction of competition in the English professional rugby market.[2] Championship clubs are locked out of part of the market with greatest access to revenues from broadcasting, sponsorship, hospitality and other associated revenues. Prima facie, such a restriction is unlawful.

However, in certain circumstances, restrictions on competition may be deemed permissible. Following a line of EU case law, which remains relevant post-Brexit,[3] a restrictive measure may be deemed an “ancillary restraint”. [4] If the restriction is ancillary to a primary, legitimate purpose, it may not violate competition law. This has been applied in the sporting context, following Meca-Medina.[5] The case law makes clear that where a restriction has a legitimate purpose, it will not be unlawful if it is inherent and proportionate to that legitimate purpose.

In Premiership Rugby v Saracens (the 2019 salary cap case), the independent panel recognised that financial stability and competitive balance are both legitimate objectives in competition law.[6] These same objectives would likely be used to try to justify ring-fencing the Premiership. The question would then be whether ring-fencing is inherent and proportionate to these aims, in light of the circumstances brought about by the pandemic.

On one hand, the RFU (and Premiership Rugby) would be arguing that it is inherent and proportionate, because of the financial instability created by COVID-19. The argument would be that, if the league is not ring-fenced, the relegated Premiership club(s) would cease to exist and/or that the very risk of relegation in this climate is such that investment would be discouraged, resulting in further financial instability and competitive imbalance. They would likely emphasise that the ring-fencing is not permanent and will include a mechanism by which clubs can gain promotion in future. They would emphasise that the sport does not want another London Welsh case – a team that was promoted (after a competition law challenge) but subsequently failed to perform on the pitch and ultimately succumbed to liquidation.

On the other hand, the Championship club(s) would argue that ring-fencing the Premiership for three to four seasons goes beyond what is necessary to achieve financial stability and competitive balance. A club such as Ealing Trailfinders might argue that they are well-placed to survive in the Premiership and should not be denied the opportunity to compete simply because some Premiership club owners are unwilling or unable to continue funding their clubs.

They might argue that less restrictive measures, such as suspending relegation but not promotion, would be more proportionate, or that clubs afraid of financial oblivion should be required to seek external investment. They might suggest that greater investment into the Championship, by way of funding or by commercialising the league, would ensure a softer landing for relegated Premiership clubs whilst maintaining competition. The essence of their case would be that there is no reason why the 13 Premiership clubs should have a greater right to compete in the Premiership than any of the Championship clubs, if they are able to demonstrate that they would be able to operate sustainably. They would say that ring-fencing goes further than reasonably necessary.

If the Premiership is formally ring-fenced, do not be surprised to see a legal challenge by one or more Championship clubs. Though by no means straightforward, the club(s) would have a good arguable case, that would certainly catch the attention of competition lawyers. Indeed, even if relegation and promotion is not suspended, a competition law challenge cannot be ruled out, given the prejudice caused by Premiership’s P-share system.

Lastly, it is worth considering the possibility that Saracens do not win the Championship this season. Ealing Trailfinders have beaten Saracens twice in the past month. If Ealing were to win the Championship, they would need to comply with the (unpublished) MSC in order to be promoted. If they did not comply with the MSC, neither Ealing nor Saracens would be promoted.

If Saracens were locked out of the Premiership, you can be sure that a legal challenge would be brought. The competition law arguments outlined above would inevitably be raised and would arguably be stronger given the club’s history as one of England’s most successful clubs.

Saracens might also have grounds for challenge by virtue of its position as a shareholder of Premiership Rugby. For example, Saracens might be able to argue that it has been unfairly prejudiced by the other shareholders of the league, under s.994 of the Companies Act 2006. However, to successfully obtain relief on this basis, it would need to prove that the actions of the league in recommending ring-fencing to the RFU were objectively unfair.[7] Assuming that the proper regulatory process is followed, this might prove difficult.

In any event, such a challenge would not aid Saracens in being immediately promoted if they do not win the Championship this season. Only the Championship winner is eligible for promotion. A Saracens challenge would relate only to the measures put in place for future seasons.

3. Conclusion

Premiership Rugby and the RFU will need to take care to comply with competition law when formulating their recommendations for the future structure of English professional rugby. As the London Welsh v RFU case demonstrated in 2012, competition law can be a great tool for clubs seeking to climb the rugby pyramid. A further moratorium on promotion and relegation would be ripe for a challenge once again.

Article by Ben Cisneros. Ben is a Trainee Solicitor at Morgan Sports Law. Please email ben.cisneros@morgansl.com for any legal or media enquiries. 

References:

[1] See Premiership Regulation 3.2

[2] This conduct could be construed as an anti-competitive agreement/decision, or as an abuse of a dominant position.

[3] Section 60A of the Competition Act 1998

[4] Case C-309/99 Wouters v Algemene Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577

[5] Case C-519/04 P David Meca-Medina and Igor Majcen v Commission [2006] ECR I-6991

[6] Premier Rugby Limited v Saracens [2019], paragraph 34.

[7] Re Saul D Harrison & Sons plc [1994] BCC 475, per Hoffmann LJ at 488.