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Competition Economics Blog.    

International Journal of Sport Finance 14th February - Revenue Sharing, Salary Caps and Competitive Balance in Rugby.

Joint selling and revenue sharing along are generally prohibited under competition. However, many sports leagues sell their TV broadcast rights collectiely and share the proceeds among their member clubs. Some leagues also have salary caps which essentially limit the amount that clubs can pay their players. Leagues have frequently justified such practices as being necessary to ensure competitive balance and thus maintain supporter interest. In an article co-authored with Dr Vincent Hogan of UCD, Compecon's Patrick Massey looks at the effect of the introduction of revenue sharing and salary caps in the English Rugby Premiership. The introduction of professionalism in rugby in 1995 resulted in a major upheaval in the sport. Competitive balance declined in both the English and French leagues. However, as clubs continued to pay players more, two English Premiership clubs went into administration in 1999. The league introduced revenue sharing and a salary cap to prevent further club collapses. The study finds that competitive balance improved in English rugby following the introduction of such measures.

Competitive Balance: Results of a Natural Experiment from Rugby Union, International Journal of Sport Finance, 13(1) February 2018. To access a copy of this article click here.

Brussels 24th January - EU Commission Fines Qualcomm €997 million.

The EU Commission has found that Qualcomm abused its dominant position in the market for LTE baseband chipsets. The Commission ruled that Qualcomm had prevented rivals from competing in the market by making significant payments to a key customer (Apple) on condition it would not use chipsets produced by Qualcomm's rivals in its tablets and smartphones. The Commission fined Qualcomm €997 million. It is the first Commission decision in an abuse of dominance case since the CJEU overturned its findings in Intel in September 2017.

Brussels 18th January - EU Commission Welcomes New Payment System Rules.

The EU Commission has issued new requirements designed to ensure the independence of payment card schemes and processing entities, to enhance competition in the card payment market. Retailers will be able to choose the most suitable processor for their card transactions, to the benefit of consumers.

Luxembourg 20th December 2017 - CJEU Rules that Uber is Providing a Taxi Service.

The Court of Justice of the European Union (CJEU) ruled that Uber was a provider of taxi services. The judgement arose following a referral to the Court for a preliminary ruling by Spanish Commercial Court No. 3 in Barcelona in a case brought by a Spanish taxi drivers' association challenging UBER for providing an unauthrosied taxi services. The Spanish Court asked whether UBER should be regarded as information society services, transport services or a combination of both. The CJEU held that, in principle, UBER's activities met the criteria for classification as an ‘information society service’ within the meaning of Article 1(2) of Directive 98/34 and Article 2(a) of Directive 2000/31. However, the Court went on to rule that an intermediation service such as that provided by UBER, the purpose of which is to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys, must be regarded as being inherently linked to a transport service and, accordingly, must be classified as ‘a service in the field of transport’ within the meaning of Article 58(1) TFEU.

Luxembourg 6th September 2017 - CJEU Overturns Intel Ruling on Appeal.

The Court of Justice of the European Union upheld an appeal by Intel against a finding that it had abused its dominant position by paying loyalty rebates to computer manufacturers who used its processors in their products. The Court ruled that the EU Commission "is not only required to analyse, first, the extent of the undertakings dominant position on the relevant market and, secondly, the  share of the market covered by the challenged practice, as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market." The Court went on to state that when analysing the capacity of such rebates to foreclose the market it was also necessary to ascertain whether there was an objective justificaiton for such rebates and whether any negative effect on competition might "be counterbalanced, or outweighed, by advantages in terms of efficiency which also benefit the consumer". This requires an analysis of whether a practice is capable of foreclsoing equally efficient competitors.

Paderborn 30th August 2017 - Patrick Massey Addresses European Sports Economics Association Annual Conference.

Compecon Director Patrick Massey presented two papers at the Annual ESEA Conference at the University of Paderborn. The first paper which was o-authored with Dr Vincent Hogan of UCD employed a production frontier model to measure the efficiency of teams in rugby's Pro-12 league. The model measures how efficent teams are in terms of winning matches given the playing resources available to them. The results indicate that Irish teams were more than most of the other teams with Leinster, Munster and Ulster among the four most efficient teams with efficiency levels in excess of 90%. The second paper co-authored with Dr Robbie Butler of UCC and Dr. Liam Lenten of La Trobe Univeristy in Melbourne analysed the impact of bonus points on team behaviour in rugby's Heineken Cup. The analysis found that bonus points increased the likelihood that teams, particularly home teams would score four tries but reduced the incidence of teams scoring more than four tries suggesting that teams tended to ease off once they achieved the bonus target.

For earlier reports see Compecon's News Archive.