Saracens v Competition Law: worth a try?

Jessica MaskreyPosted by

Background

Saracens are an English professional rugby team based in London. They play in the top tier of English rugby and are a dominant force in both the domestic and European game – they were crowned Premiership Rugby champions in 4 of the last 5 seasons and won the European Rugby Champions Cup in 2016, 2017 and 2019.

But on 5 November 2019, it was announced by Premiership Rugby that Saracens had been fined £5.36million and deducted 35 league points by an independent disciplinary panel. Saracens were referred to the independent disciplinary panel following a Premiership Rugby investigation, as it was suspected that they had breached The Premiership Rugby Salary Cap Regulations. These regulations were introduced in 1999 to ensure a level financial playing field for all teams within the Premiership. The current regulations cap the “whole squad spend” at £7 million (with an allowance for two players outwith that spend and for injuries).

The panel, chaired by Lord Dyson, a former Justice of the Supreme Court of the United Kingdom, upheld all of the charges levelled against Saracens and imposed the sanctions:

• For failing to disclose payments to players in seasons 2016-17, 2017-18 and 2018-19; and

• For exceeding the ceiling for payments to senior players for each of these three seasons.

Based on Saracens’ subsequent public statement, it is evident that the investigation and subsequent sanctions focussed on the practices of owner, Nigel Wray, entering into business partnerships (a.k.a. “co-investments”) with some players. These were found to breach the salary cap regulations, even though it was accepted by the panel that the breach was not deliberate.

In terms of further procedure, Saracens could sought the review of the decision by a further arbitration body. In the event that this review proved unsuccessful, they could have made a legal challenge of the decision to the High Court on one of the following points:

• error of law;

• irrationality; or

• procedural unfairness.

However, this article will not address the merits of such a claim or seek to discuss that in any detail. Instead, the focus will be on Saracens’ challenge on competition law grounds to the validity of the Regulations.

Competition law aspects

The competition law considerations of the situation are three-fold:

• Firstly, the Premiership’s salary cap regulations were put in place with competition in mind. As in other sports, there is a potential risk of “financial doping” which skews team dynamics. This means that smaller teams or those with less capital are left at a competitive disadvantage compared to larger teams, who can afford to pay higher salaries to their players. Salary caps are prevalent in many other sports and are a method of ensuring a level of “competitive uncertainty” remains in the game.

• Secondly, Saracens argued that the regulations themselves were anti-competitive. Although the full reasoning of the panel was not, and will not be, published, this argument was rejected by the panel: “In setting out its conclusions, the Panel noted that the salary cap operates in a pro-competitive manner by promoting the objectives of ensuring the financial viability of Clubs, controlling inflationary pressures, providing a level playing field, ensuring a competitive league and enabling Clubs to compete in European competitions.”

• Thirdly, it had been suggested by former World Rugby head of legal Darren Bailey that the club could seek to contest the finding by arguing once more that the regulations are anti-competitive. While acknowledging that this would involve a large number of procedural obstacles, Bailey stated that Saracens could argue that the salary cap fettered their ability to be competitive. Bailey acknowledged that this is almost a contradiction of terms: the framework which has been put in place in rugby to ensure a level of competition is, in actuality, hindering a club’s ability to be competitive and is disproportionate to the “needs of the tournament.” However, as the competition law argument was already rejected by the panel in the first instance, it is questionable whether this argument would have held weight in the High Court.

Conclusion

Saracens had until midnight on 18 November 2019 to contest the panel’s decision but confirmed that they will accept the sanctions for the good of the game. Premiership Rugby’s chief executive, Darren Childs, welcomed this and is said to be looking forward to “working in partnership with all clubs to continue to build a competitive and successful league.”

Undoubtedly, the approach taken by the governing body and the disciplinary panel was a clear and robust rebuke to Saracens’ payment practices. This will have sent a strong message to all Premiership clubs that even the current champion is not above reproach, and it suggests that similar competition law challenges will have little traction in similar circumstances going forward.

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