Keeping the imposters out: The 50+1 Rule
Football and competition law are not usually two phrases one might hear in the same sentence. However, that changed recently when news broke of a new ‘rebel’ competition in Europe. On the 18th of April 2021, twelve association football clubs from England, Spain and Italy in a blatant grab for money announced they were forming their own competition named the European Super League (‘ESL’). The competition was decried by fans, pundits, and politicians alike because of the exclusivity that the ESL structure would usher in to European football. Regardless, the announcement was not surprising, with the move being emblematic of the fact that these clubs are now global brands with passionless international fans, imported millionaire players and foreign billionaire owners.
Many fans who value these clubs as more than a mere profit maximising operation and instead a place that involves community, history, and tradition, would like to see the back of these billionaire owners and for them to stay out. However, a sliver of hope has emerged out of the ESL debacle, in the form of an interesting omission of the German clubs. While the likes of Bayern Munich and Borussia Dortmund, two of Germany’s clubs, are of ESL’s ilk, they refused to sign up. Many have speculated it is because German football clubs must comply with the 50+1 Rule.
The 50+1 Rule
In 1998 the German Football Association (DFB) introduced regulations to allow football clubs who until this point had been non-profit organisations run by their members (fans) to become public or private limited companies. This meant that private investors were able to buy a share of a club on one condition: that the members held at least 50% plus one share of the football company. This allowed German clubs to keep up financially with other European clubs who were receiving significant funds from their private owners while ensuring that the fans still had control over their clubs. The fans in Germany’s football clubs were not on board with the ESL, hence their refusal to participate in the league.
Competition law
There have been questions raised about whether the 50+1 rule complies with EU competition law. Competition law aims to maintain market competition by regulating anti-competitive conduct. While most of competition law is focused on preventing competitive advantages such as monopolies or restrictions on free trade the issue in this case is the rule creates a competitive disadvantage.
Complaints have been made claiming the rule limits the amount of influence an investor can have in the running of the club. It also has been noted that the rule puts German clubs at a competitive disadvantage to the rest of European clubs. Since the rule’s introduction 23 years ago, there has been plenty of speculation and murmurings of legal action; however, the German courts to this date have yet to take any inkling of a negative view against the regulation.
RB Leipzig
The rule is not without exception. RB Leipzig has caused much consternation amongst the football community for their infamous rise to the top ranks of German and European football. Often referred to as Red Bull Leipzig, the club was formed in 2009 by the energy drink company. The club then proceeded through the German Football league pyramid before finally reaching the Bundesliga (Germany’s top tier league) in the 2016-17 season. The club was founded by seven staff and agents of Red Bull and to this day many of their voting members are staff or otherwise associated with the company. Voting membership is still severely restricted and their member registration fee can be up to ten times that of similar clubs. While there is constant criticism against the club, the DFB has failed to take any significant action.
Potential Further Use
In brief, the rule so far is seen as legally viable and while some have worked ways around it, overall, it seems to be a successful model. The question then becomes, can it be used or adapted in other settings? In the wake of the ESL announcement, the British government was openly considering forcing the 50+1 rule, amongst other options, onto English clubs.
Looking away from football, the 50+1 rule can be seen in the proposal the Greens made in the 2019 federal election. The Greens called for public ownership of electricity companies, banking, and the internet. Their argument was that they are public goods and essential services and as such should not be run for a profit. However, public ownership or government ownership of entities and services has long been criticised for their inefficiency and waste of public funds. Could there be a model like the 50+1 rule where the community keeps some level of control while still allowing for private investment that could be utilized in certain industries? The issue is a complicated and multifaceted one, and the answer one way or another depends on the practical implementation of the concept.
The future
For many, football has less to do with money and more to do with being a part of something bigger than yourself. The high profile criticism of the league also saw that shortly after the ESL launch announcement was made, three quarters of the 12 clubs that were originally involved withdrew, effectively terminating the competition before it even began. Whether or not the 50+1 rule inhibits competitiveness in the market, this seems to be outweighed in countries such as Germany because of the benefits to the community, who are the majority consumers of football and all the ways it brings meaning and joy to their lives. The ESL debacle is an excellent example of how where the public primarily benefits from something, public ownership of it means that decisions made regarding it are actually in the interest of its users. More aspects of society would likely prosper from a similar mechanism.
Article by Matthew Adams
This article appeared in the The Gavel #1 ‘The Among Us Issue’ (2021) Publication