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Competition and Professional Sports – BUDZINSKI – December 2023 OECD discussion

This presentation by Oliver BUDZINSKI, Professor of Economic Theory (Chair), Ilmenau University of Technology, was made during the discussion “Competition and Professional Sports” held at the 76th meeting of the OECD Working Party No. 2 on Competition and Regulation on 4 December 2023. More papers and presentations on the topic can be found out at oe.cd/capfs. This presentation was uploaded with the author’s consent.

Competition and Professional Sports – BUDZINSKI – December 2023 OECD discussion

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OECD Best Practice Roundtable
Competition and Professional Sports
Oliver Budzinski
Prof. Dr. Oliver Budzinski
Chair for Economic Theory
Institute of Economics (Director)
Ilmenau University of Technology
Email: oliver.budzinski@tu-Ilmenau.de
Economics Background
- Sports Associations/Sports Governing Bodies often act as internal market
regulators (setting, implementing and enforcing rules)
- sometimes (directly or indirectly) combined with commercial activities (i.e.
marketing the competition) [“dual role”]
- nature of sport requires market-internal regulator …
- … who inevitably possess horizontal and vertical market power
- incentives to anticompetitively abuse this market power depends on specific
institutional setting but is especially given in dual role-situations
2
Rules on (Market/Competition) Entry
- rules of market entry for premium championships: obvious relevance to compete at
the highest level
o restriction of participants legitimate and inherent …
o … but proportional?
 number of participants / overly restrictive (= artificial quantity reduction)
 closed leagues/shops, incl. unwillingness to fill empty slots
 Can the best compete? (= selection on sporting merits)
3
Rules on (Market/Competition) Entry
o … adequate selection criteria?
 Example 1: Formula 1 motor racing
 10 out of 12-13 team places filled
 reluctant action to fill empty slots by the SGBs
 transparency of procedure?
 significant commercial contribution as a relevant selection criterion?
 Higher demands for potential entries than for incumbents – can this be
procompetitive?
4
Rules on (Market/Competition) Entry
o … adequate selection criteria?
 Example 2: Judo at Olympia
 only one Judoka per nation, sex, and weight class
 broad access for athletes from different countries …
 … but exclusion of top athletes in favour of lesser athletes (e.g.
exclusion of No. 2 world ranking in favour of No. 23)
 When some of the world best athletes cannot entry the most lucrative
competition because of nation clauses – procompetitive?
5
Recent Competition & Sports Related Publications
Budzinski, O. (2023), (Sports) Economics Upside Down? – A Comment on the Advocate General Opinion in European Super
League versus UEFA/FIFA, in: Concurrences, Vol. 20 (1), 2023, pp. 8-16.
Budzinski, O. & Feddersen, A. (2023), Should Organizing Premier-Level European Football Be a Monopoly? And Who Should
Run It? – An Economists’ Perspective, in: J. Kornbeck (ed.), EU Sports Antitrust Law and Governance: The Next Frontier?,
Cheltenham: Elgar 2023, pp. 85-101.
Budzinski, O., Feddersen, A. & Kunz-Kaltenhäuser, P. (2022), Demand for TV Broadcasts of UEFA Champions League
Games in Danish Television – The Impact of Uncertainty of Outcome, Stardom, and Local Heroes, Ilmenau Economics
Discussion Papers 27 (165), 2022, pp. 1-20.
Budzinski, O. (2019), Competition Policy in Sports Markets, in: P. Downward et al. (Eds.), The SAGE Handbook of Sports
Economics, Los Angeles: Sage 2019, pp. 144-153.
Budzinski, O. & Müller, A. (2018), Is the Revenue Allocation Scheme of Formula One Motor Racing a Case for European
Competition Policy? in: Contemporary Economic Policy, Vol. 36 (1), 2018, pp. 215-233.
Budzinski, O. (2018), Financial Regulation as an Anticompetitive Institution, in: M. Breuer & D. Forrest (eds.), The Palgrave
Handbook on the Economics of Manipulation in Professional Sports, Basingstoke: Palgrave 2018, pp. 159-179.
Budzinski, O. (2014), The Competition Economics of Financial Fair Play, in: O. Budzinski & A. Feddersen (eds.),
Contemporary Research in Sports Economics, Frankfurt a.M.: Lang 2014, pp. 77-98.
7

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Competition and Professional Sports – BUDZINSKI – December 2023 OECD discussion

  • 1. OECD Best Practice Roundtable Competition and Professional Sports Oliver Budzinski Prof. Dr. Oliver Budzinski Chair for Economic Theory Institute of Economics (Director) Ilmenau University of Technology Email: oliver.budzinski@tu-Ilmenau.de
  • 2. Economics Background - Sports Associations/Sports Governing Bodies often act as internal market regulators (setting, implementing and enforcing rules) - sometimes (directly or indirectly) combined with commercial activities (i.e. marketing the competition) [“dual role”] - nature of sport requires market-internal regulator … - … who inevitably possess horizontal and vertical market power - incentives to anticompetitively abuse this market power depends on specific institutional setting but is especially given in dual role-situations 2
  • 3. Rules on (Market/Competition) Entry - rules of market entry for premium championships: obvious relevance to compete at the highest level o restriction of participants legitimate and inherent … o … but proportional?  number of participants / overly restrictive (= artificial quantity reduction)  closed leagues/shops, incl. unwillingness to fill empty slots  Can the best compete? (= selection on sporting merits) 3
  • 4. Rules on (Market/Competition) Entry o … adequate selection criteria?  Example 1: Formula 1 motor racing  10 out of 12-13 team places filled  reluctant action to fill empty slots by the SGBs  transparency of procedure?  significant commercial contribution as a relevant selection criterion?  Higher demands for potential entries than for incumbents – can this be procompetitive? 4
  • 5. Rules on (Market/Competition) Entry o … adequate selection criteria?  Example 2: Judo at Olympia  only one Judoka per nation, sex, and weight class  broad access for athletes from different countries …  … but exclusion of top athletes in favour of lesser athletes (e.g. exclusion of No. 2 world ranking in favour of No. 23)  When some of the world best athletes cannot entry the most lucrative competition because of nation clauses – procompetitive? 5
  • 6. Recent Competition & Sports Related Publications Budzinski, O. (2023), (Sports) Economics Upside Down? – A Comment on the Advocate General Opinion in European Super League versus UEFA/FIFA, in: Concurrences, Vol. 20 (1), 2023, pp. 8-16. Budzinski, O. & Feddersen, A. (2023), Should Organizing Premier-Level European Football Be a Monopoly? And Who Should Run It? – An Economists’ Perspective, in: J. Kornbeck (ed.), EU Sports Antitrust Law and Governance: The Next Frontier?, Cheltenham: Elgar 2023, pp. 85-101. Budzinski, O., Feddersen, A. & Kunz-Kaltenhäuser, P. (2022), Demand for TV Broadcasts of UEFA Champions League Games in Danish Television – The Impact of Uncertainty of Outcome, Stardom, and Local Heroes, Ilmenau Economics Discussion Papers 27 (165), 2022, pp. 1-20. Budzinski, O. (2019), Competition Policy in Sports Markets, in: P. Downward et al. (Eds.), The SAGE Handbook of Sports Economics, Los Angeles: Sage 2019, pp. 144-153. Budzinski, O. & Müller, A. (2018), Is the Revenue Allocation Scheme of Formula One Motor Racing a Case for European Competition Policy? in: Contemporary Economic Policy, Vol. 36 (1), 2018, pp. 215-233. Budzinski, O. (2018), Financial Regulation as an Anticompetitive Institution, in: M. Breuer & D. Forrest (eds.), The Palgrave Handbook on the Economics of Manipulation in Professional Sports, Basingstoke: Palgrave 2018, pp. 159-179. Budzinski, O. (2014), The Competition Economics of Financial Fair Play, in: O. Budzinski & A. Feddersen (eds.), Contemporary Research in Sports Economics, Frankfurt a.M.: Lang 2014, pp. 77-98. 7