Match-Fixing and Corruption in Sport and Sponsorship Agreements - Protecting your commercial position

Business

Corruption in sport can take many forms. This article will review recent cases of match fixing and the consequences for the individuals involved and also at how commercial sponsors can protect themselves in their sponsorship agreements.

During the Olympic Games in 388BC, Eupolos of Thessalia bribed three of his competitors in order to win gold in a fighting tournament. It seems that with the birth of sport, came the birth of corruption in sport.

Corruption in sports can take many forms, with cases in recent years commonly involving doping, bribery or match fixing.

This article will review recent cases of match fixing, the legal and other consequences for the individuals involved, and finally look at ways federations/teams/events/individuals on the one side, and sponsors on the other, can protect themselves in their sponsorship agreements from the fallout of match fixing allegations or other forms of corruption.

Match-fixing

Sport New Zealand has defined match fixing as the act of “improperly influencing the overall result or any part (spot-fixing) of a sports match, game, race or event for financial or personal benefit, rather than for tactical sporting reasons. Match-fixing is commonly associated with bets placed on arranged outcomes for financial return.”

The increased sophistication of betting and the growth of the betting industry, particularly the proliferation of unregulated online betting over the last decade, has created a surge of opportunity for criminals and athletes across all sports to match and spot fix for often large financial gain.

Punters are no longer limited to betting on an individual or team’s win or loss, but numerous activities within a game, such as first try scorer (rugby), number of aces (tennis), highest run scorer (cricket), the margin of win, number of penalties conceded and so on. Sports where a game is more ‘episodic’ and can be manipulated by an individual competitor are at a higher risk of match and spot fixing.  Combine this attribute with a game that is of less importance (for example, a dead rubber) and the risk of fixing increases.

Some have also argued that New Zealand sports are particularly vulnerable, with our sports people earning significantly less than professional athletes in other parts of the world, the allure of significant extra income can be all too tempting.

New Zealand Response

In response to the increased risk of fixing in our sports, the New Zealand government passed the Crimes (Match-Fixing) Amendment Act in 2014, just prior to the ICC Cricket World Cup held in Australia and New Zealand. This extended the scope of Section 240 of the Crimes Act 1961 to include “any act or omission that is done or omitted with intent to influence a better outcome of an activity…by manipulating (a) the overall result of the activity; or (b) any event within the activity.” Determining that fixing falls within s 240 finally provided criminal sanctions as a consequence for such acts, and importantly strengthened the position in New Zealand against fixing.

As well as criminal consequences, an individual involved in match fixing can expect severe sanctions to be imposed by his/her team or the relevant sport’s governing body in accordance with its independent policies and procedures.

Sport New Zealand has issued its “New Zealand Policy on Sports Match-Fixing and Related Corruption”, which it aims to “provide a comprehensive framework to prevent and address match-fixing risks”. The policy requires the cooperation of national sport organisations (NSOs), the sports betting industry and government agencies to implement its provisions, as well as imposing certain hard obligations on NSOs, including compliance with the national policy and education for players, coaches, management, umpires and all other parties involved.

The scale on which each NSO will tackle the issue will depend on both its susceptibility to potential match or spot fixing as well as its management and funding. Despite no evidence of match fixing as yet, the increased threat alone has caused NZ Rugby to step up their policing of the issue. NZ Rugby signed a two-year deal with Sportradar, whose fraud detection software will identify any betting irregularities on any Super Rugby match involving a New Zealand based team, all NPC matches and All Blacks home tests. NZ Rugby have also gone further and employed an integrity manager and plan to educate its players on illegal betting and approaches.

Impact for Sponsors – recent examples

The commercial reality for teams/events/federations and even individual athletes means that lucrative sponsorship deals are a key form of revenue. For sponsors, the positive brand association with a popular sports team and its exposure through sponsor activation, adds brand value and can directly result in increased sales for that company. However when a team or event is dogged by match-fixing or other corruption allegations, that brand association can turn negative and often sponsors will then be looking for a way out of their multi-year sponsorship agreement.

There is a very real and direct correlation between the damage to a federation or team’s image due to corruption and the withdrawal of big sponsors. “The level of media interest, the nature, frequency and severity of the transgression and how closely related the transgression is to the sponsor’s business or target market will determine the severity in which the sponsor will deal with any potential situation.” (Gorse/Chadwick – “Conceptualising Corruption in Sport”) Implications for sponsors will range, in the most acute circumstances a sponsor may be forced to terminate its sponsorship agreement to distance itself from the negative publicity associated with the relevant federation, team, event or individual.

Examples of the withdrawal of sponsorship in recent years include:

  • Sony, Emirates, Castrol, Continental and Johnson & Johnson – withdrew their sponsorship from FIFA in early 2015 due to the bribery scandal and further key sponsors including Visa and Coca Cola threatened to withdraw later that year if FIFA did not act swiftly and decisively in response to corruption allegations.

  • ING withdrew support (approx. $80m per year) from F1 team Renault in 2008 as direct result of the Crashgate scandal.

  • In 2015, PepsiCo withdrew from its title sponsorship of the Indian Premier League ($71m over five years from 2013) following various match-fixing scandals plaguing the league (in July 2015, teams Chennai Super Kings and Rajasthan Royals were both suspended from the competition for two years).

  • In January 2016, Adidas terminated its sponsorship deal with IAAF four years early as a direct result of the corruption claims hounding the athletics governing body. Adidas and IAAF had agreed an 11 year deal in 2008, worth approx. NZD $10 million each year. In February 2016, Nestle followed suit and ended its sponsorship relationship with IAAF. The impact to IAAF’s funding will be significant.

  • Just recently, after admitting to failing a drug test at the Australian Open, Maria Sharapova is facing the withdrawal of several significant endorsements and sponsors. Nike has suspended its sponsorship of the tennis star (a deal reportedly worth over $70 million over 8 years), Tag Heuer has cut all ties and Porsche has postponed all sponsor activities for the foreseeable future.

Sponsorship Agreements - Federations/Teams/Events Perspective

A sponsor’s reaction to an instance of match-fixing or other form of corruption will have knock-on effects for the federation/team/event, should a large amount of funding suddenly be cut from its budget. Teams, federations and events may struggle to attract new sponsors, or even retain existing sponsors.

The key issue teams/federations/events face is that while an allegation of match fixing is not yet proven, sponsors will react as if it has been (at least from point of view of its customers). A team, federation or event, as applicable, is unlikely to be able to take any action against an individual (ie sanctions or termination) until the individual is proven guilty, so its hands can be tied while trying to appease sponsor’s concerns.

Federations/teams/events need to consider the benefits of including alternative remedies to avoid a case of match-fixing or other corruption resulting in the full withdrawal of a key sponsor.

Including additional conditions before a termination right is triggered is a practical way a team/event/federation can minimise the likelihood of the loss of its sponsor. For example, you may have a condition that requires that the team or individual accused has official sporting sanctions imposed upon it or him/her before a termination by the sponsor right can be invoked.

Sponsorship Agreements - Sponsors Perspective

Most sponsorship or individual endorsement agreements include some variation of a ‘morality’ clause. Some will, and should, go further in respect of match fixing and corruption allegations, clarifying the specific remedies available to the sponsor, including remedies for different levels of severity.

While a sponsor’s brand/image can be immediately damaged by allegations of match-fixing involving a player or team, investigations into the same can be protracted, particularly any criminal prosecution. Sponsors should look to design any protective clause in such a way that a team or player merely being charged or investigated in respect of match fixing, is the trigger for any right of termination or other remedy included in the sponsorship agreement. This enables the sponsor to limit the length of time their brand continues to be associated with the relevant federation/team/event/individual.

Sponsors should also ensure that such fixing or general corruption clauses are widely drafted, covering as many people associated with the federation/team/event as possible (for example “players, referees, officials, directors or other representatives…”).

Federations/teams/events/individuals and sponsors can both benefit greatly from focusing on the language of a fixing or general corruption clause, ensuring that the triggers and remedies in such circumstances are appropriate and clear.

If you wish to discuss any aspect of this article further please do not hesitate to contact Emma Turner, an associate in Cavell Leitch’s Business Team.

All Articles

Copyright © Cavell Leitch. All rights reserved. Redistribution is only permitted with express written permission. For enquiries please contact us. This article by its nature cannot be comprehensive and cannot be relied on by clients as advice. It is provided to assist clients to identify legal issues on which they should seek legal advice. Please consult the professional staff of Cavell Leitch for advice specific to your situation.