KhelAdhikar

Play it Even

Rule 40: A Necessary Evil to Prevent Unnecessary Illusion

Image via (Source Link)

By Rishika Mendiratta and Palak Nagar

A school football coach teaches his students the value of hard work. He encourages discipline, unwavering dedication and boundless courage.  His players respond with all they have and the school becomes a champion of the league. His striker gets him 30 goals a season. But then the coach discovers his deep dark secret. No, it isn’t drugs. He isn’t overage either. His boots are sponsored by Nike while the tournament is sponsored by Adidas. Nike committed the cardinal sin of wishing their star protégé on his success on social media. Naturally, his goals are all cancelled and his team drops 7 places. Absurd? Welcome to the Olympics! This article will be your guide in the quest to understand the relevancy and redundancy of Rule 40.

George Orwell aptly explained the competitive spirit of sports when he said, – “Sports is war minus the shooting.” This aspect is also evident in the aggressive marketing strategies adopted by sponsors and non-sponsors making these events an ambitious battle of brands.

Olympic is not a sporting spectacle rather Olympism is a philosophy of life[1] drawing its rationale from the joy found in effort, the educational value of a good example and respect for universal fundamental ethical principles.[2] Olympic has an ensconced place in the international sphere transcending its sporting relevance. The Black Power salute of 1968, the Boycott by the Soviet Union of 1956 Olympics and the recognition of Jesse Owens as a hero for refuting Nazi ideologies rather than his athletic capabilities sums up its wide-reaching implications.  Olympics in its essence, exemplifies its aim of Citius, Altius, Fortius in all aspects of life through the demonstration of uber-sporting spectacle. Undoubtedly because of these reasons, it is one of the most watched, romanticised, revered, commercialised, advertised, and nationalistic, passionately followed and critiqued mega sporting event.[3]

The Olympic Charter (OC) is the codification of the Fundamental Principles of Olympism, Rules and Bye-laws adopted by the International Olympic Committee (IOC). It governs the organisation, action and operation of the Olympic Movement and sets forth the conditions for the celebration of the Olympic Games[4]. Rule 40 has been one of the most debatable and contentious rules laid down in the Olympic Charter. Bye-law 3 to Rule 40 of the Olympic Charter reads: “Except as permitted by the IOC Executive Board, no competitor, team official or other team personnel who participates in the Olympic Games may allow his person, name, picture or sports performances to be used for advertising purposes during the Olympic Games.”[5] Rule 40 impinges on the thin line between upholding the ethical values of the event and its inclination towards over-commercialisation. It was passed in 1991 in order to prevent the unofficial sponsors from unauthorised association with the games which might jeopardise the interests of the event in terms of earnings as well as brand value.

These concerns are not illusory but have been prevalent in the Olympics for over two decades now. In the year 1996 Atlanta Olympics, Nike constructed a Nike store outside the athletes’ village with billboards and handed out banners to wave at the competitions and erected an enormous Nike centre overlooking the stadium. This saved the U.S. $50 million that an official sponsorship would have cost. The association with the brand Li Ning in the 2008 Beijing Olympics in place of Adidas and the Beats Dre Headphones controversy are all examples of unethical commercial nexus with the games even after the inception of Rule 40.[6] The added element in the 2012 Olympics, dubbed as the first ever Twitter Olympics[7] were the restrictions imposed on the athletes and their sponsors over their use of social media in pursuance of marketing activities during the Olympic Games. There was a bar on the athletes from alluding or associating with their individual sponsors during the event so as to maintain the “sacred trusts” which has conventionally formed the basis for sports governing bodies’ trusteeship over sporting codes”.[8] This lead to IOC receiving a lot of flak from the sponsors and athletes considering these restrictions as an overreach of its authority over the conduct of the games.

The attempts by non-sponsors at taking leverage during the Olympic games is a form of ambush marketing which is defined as “a form of strategic marketing which is designed to capitalize on the awareness, attention, goodwill, and other benefits, generated by having an association with an event or property, without an official or direct connection to that event or property. Thus, ambush marketing is the attempt to create direct, or indirect association with a sports facility, of the event being hosted, or even its participants without their approval and without the official designation.”[9] The moot point which remains before going into the intricacies and fallacies of Rule 40 is whether the rationale behind Rule 40 is flawed, redundant, superfluous, restrictive or necessary and imperative. To understand this we need to analyse as to what sponsorship means to the Olympics. The IOC President has succinctly encapsulated the importance of sponsorship and Rule 40 in the following words- “Our position is very clear.  We have to protect the sponsors because otherwise there is no sponsorship and without sponsorship, there are no Games.”[10]

IOC needs to protect the interests of the official sponsors because 45% of the revenue for the conduct of the games comes from association with The Official Partners(TOP)[11]. Sponsors make a humungous investment in terms of time, effort, money and promotion as a consideration for association with the games. It is a strategic action from which the sponsor expects commercial benefits to accrue. This is because Official sponsors have to pay approximately $60,000,000 to secure their positions at the Games and in related advertisements[12]. The Olympic logo is recognized by 93 per cent of the world, explaining the reason for the eagerness of brands to associate with the event.[13] McDonald’s, according to Sports Business Journal, paid close to $200 million for the eight-year-Olympics sponsorship. Besides When a brand sponsors a tournament they typically spend twice: once to acquire a legal right of association and then again on promotion around the deal to make sure it works properly – known in the trade as “activation”.[14] The sponsors spend a fortune to build their goodwill which they try to piggy-back upon.

Another point of consideration is whether monetary investment is the only reason for the existence of Rule 40? It is an undisputed truth that Sports has become a secular religion. Thus, sports events, especially Olympics, entail a further role for fans and the public as the vehicle for causes, corporate social responsibility and philanthropic endeavour. Hence, Sports is a business for teams, leagues and event owners and their broadcasters but it is an experience for everyone involved, outreaching everyday fans.[15] Thus in the case of Olympics, the brands sponsoring the event do not have a superfluous monetary association with the event, rather they are the torchbearers of values of Olympics and its brand value. The best example of this is evidenced by the explanation given by Sagar Boke, head – marketing, Tata Chemicals (Consumer Products Business), “Brands see the synergy between the values they espouse and the Olympics, and see it as a big opportunity for brand building. We believe that Olympics is just the right platform to disseminate the brand philosophy. The athletes in our campaign were chosen as they are a true epitome of the values of integrity and loyalty which the event promotes.” It is this rationale which justifies that the time at which a sponsor becomes involved with the sports property can influence the level of goodwill associated with it. A corporate sponsor can add substantial credibility to his image which in turn can enhance the sports event’s brand equity, brand loyalty and even ticket sales. The way the consumers think and feel about the sports property will directly affect the way they think and feel about the sponsor. This is because “Sport has itself become the world’s most powerful mass medium.[16] Generally a sponsor needs to invest at least three times more money than the cost of sponsorship itself in order to leverage successfully. Consumers are more likely to think favourably about the sponsor if they believe that the sponsor is motivated by a sense of community and philanthropy rather than just financial gain[17]. It is this association between the official sponsors and the IOC which is termed as Olympism in Action. This initiative exploits the potential of sport as an educational and communication tool making it a natural and key element of sustainability and the development of society. The Olympic Agenda 2020 in its 36th recommendation emphasises on strengthening this initiative in the Tokyo Olympics, 2020. The Olympic Sports for Hope programme in Haiti or the incorporation of the Olympic Truce ideal for a peaceful and better world or the Giving is Winning initiative during the summer Olympics which has expressed the support for young people especially in refugee camps are examples of sponsorships in Olympics not just being a money minting platform but a commitment to take the spirit of Olympics in the remotest corners of the world.[18] The official education programme of Olympics 2016 in Brazil called as “Transforma” is a recent example of the constant endeavour to spread Olympism in Action. Thus the official sponsors will always strive towards upholding the unique brand image of the game by focusing on the theme of “excellence”[19] as it is a mutual goal they seek to achieve through concerted efforts unlike the ambush marketers who seek for momentary fame rather and economic benefit and are parasites feeding upon the goodwill of the game and its official sponsors.

According to Global World Index Survey, with respect to World events and Olympics Coca-Cola and McDonald’s were the most recognized sponsors – being selected by 50% and 49% respectively while rest of the official tournament partners were recognized by a fifth or less signifying the necessity to control ambush marketing to increase the visibility of the official sponsors. These statistics further vindicate the enforcement of Rule 40. The We Demand Change Campaign has been a precursor to certain relaxations being provided to Rule 40. This has enabled major brands like Under Armour and Virgin Media to capitalise and run their ad campaigns even during the blackout period.

Although Rule 40 is a significant tool to protect the Olympics from the menace of ambush marketing, it cannot boast of being one of the most flawless regulations enacted by the IOC. With the passage of time, the purpose of this rule has been rendered redundant. There has been massive over-commercialisation of the Games over the years. The costs incurred by the countries to stage Olympic events along with the humungous sums paid by the Official Sponsors is indicative of the fact that the Games are soon turning into a money-making business. At 156 per cent in real terms, the Olympics have the highest average cost overrun of any type of megaproject. 47 per cent of Games has cost overruns above 100 per cent. The largest cost overrun for Summer Games was found for Montreal 1976 at 720 per cent, followed by Barcelona 1992 at 266 per cent. For Winter Games the largest cost overrun was 324 per cent for Lake Placid 1980, followed by Sochi 2014 at 289 per cent [20]. Furthermore, the distribution of revenue which is derived from various sources of funding such as funding by way of official sponsorships is worth pondering upon. Since 45% of the revenue to International Olympic Committee comes from sponsorships[21], protecting the interests of official sponsors is a legitimate concern. However, Can the protection of interests of one stakeholder undermine the interests of another? The answer to this question lies in analysing the detrimental effects of the said rule in relation to two interested parties, namely, athletes and non-official sponsors.

Firstly, Rule 40 prevents athletes from marketing themselves in one of the most important sporting events of all times. Although this might not be a very big deal when it comes to top athletes who make public appearances very often in various tournaments around the year, it affects those athletes who do not receive much exposure apart from the Olympic Period. Not all athletes receive sponsorships from official sponsors and it is an undisputed fact that most of the income for these sportspersons comes from sponsorships. Although the IOC claims to spend 90 % of the revenue it receives to promote the sporting movement, the spending is according to the discretion of the committee and an athlete cannot be guaranteed to be benefited from such spending. Lack of income through sponsorship may prevent players from continuing with their sport because it would no longer be financially viable.

Secondly, Rule 40 operates like a restrictive covenant over athletes participating in the Games. Although athletes cannot be held to be employees of the IOC, restrictive covenants apply to independent contractors as well[22]. Restrictive covenants are valid provided they are reasonable. There are various important factors that need to be taken into account by the court before deciding whether a covenant is unreasonably restrictive. Courts look into issues such as protection of the employer’s interest visà vis undue hardship caused to the employees. If Rule 40 has to be examined as a negative covenant in Indian Courts, it might be held to be reasonable on one ground-  that it operates only during the period of employment[23] ( blackout period). However, it can be ruled to be excessively harsh to an athlete which is another ground to render such clauses invalid.

Thirdly, it must not be overlooked that, the IOC is a United Nations (UN) permanent observer and it seeks to strike an appropriate balance between its autonomous interests and the human rights that the UN promotes[24]. With the advent of social media and the restrictions imposed by the IOC over the use of the same, one needs to look into the reasonability of the transgression into one of the most important human rights values i.e. freedom of speech and expression[25].Preventing athletes from resorting to traditional advertisements is a measure which stands on a different plane as compared to tweeting from a Twitter account. It has been observed that social media acts as a tool for awareness and it has done more good than harm. Most notably, the National Basketball Association (“NBA”) has used social media to its advantage. The NBA’s senior vice president of marketing noted, “having the penetration that we do on Twitter, people see NBA teams and players and other terminology in the top 10 trending topics and it is nothing short of beneficial[26].”

Finally, for a moment even if it is conceded that Rule 40 is a reasonable and a sound rule, the sanctions prescribed under the same are draconian. It is pertinent that a sanction must be commensurate with an offence. Rule 40 imposes sanctions on athletes (and not on the sponsors) for violation of any of the conditions prescribed under the said rule. The sanctions include fines, loss of accreditation, and disqualification. Essentially, it could extend to stripping an athlete off the medals he has won at the Games. There needs to be a nexus between a sanction imposed and the offence committed in order to achieve the appropriate level of deterrence. In this case, stripping off an athlete of his medals is a measure which questions his performance on the field which is totally unrelated to a sanction of an economic nature. Tweeting on cyberspace is not akin to doping in a sporting event (which may make an athlete’s performance questionable). Moreover, this sanction is unnecessarily harsh and in a way, it makes marketability of the Games more important than its merits.

Curtailment of Economic Rights of Non-Official Sponsors another thorn in the flesh. Rule 40 also affects the non-official sponsors who have been instrumental in financing the training of the athletes around the year. Long-term sponsors of Olympic athletes are prevented from capitalising on the athlete’s participation in a high-profile event[27]. There has been a relaxation in Rule 40 pursuant to a campaign staged by the athletes[28]. This discretion of relaxation of rules has been given to the National Olympic Committees. According to the procedure laid down by USOC for 2016 Rio OOlympics,the submission must contain an advertising schedule that starts no later than 27 March 2016. By starting the advertisement’s run-time four months ahead of the Rule 40 period, the risk of the public associating the unofficial sponsor with the Olympics will be reduced, relative to an advertising campaign that starts when the Games begin[29].However, not all non -official sponsors have the financial ability to stage advertisements for such a long period before the Games and it may not be economically viable for them. IOC has provided some relaxations pertaining to Rule 40 and the National Olympic Committees have been entrusted with the task of providing waivers in some cases. Unfortunately, these relaxations have proved to be Bootless benefits.

IOC delegated the task of granting waivers and consent to the NOCs in order to allow the athletes to engage themselves in certain advertisements, and in some form of publicity. A few guidelines have been laid down in this regard. An NOC shall have the discretion to grant a waiver to any athlete from adhering to Rule 40. NOCs such as BOA (British Olympic Association) have made a rule that deemed consent shall be granted in cases wherein products featuring athletes have been used for a long-term period prior to the Olympic Games. When deemed consent cannot be granted, a waiver can be granted in cases wherein an athlete has appeared in advertisements of watches, perfumes, soaps, etc without reference to any specific sporting achievements[30].

NOCs have 21 calendar days to reply to a request for waiver.  The Committees need to look into the probable commercial association of the advertisement with the Games and look for words such as ‘Olympic’, ‘Rio’, ‘Medal’, etc. Furthermore, an NOC is empowered to make additional rules in order to deny waiver requests. It is only required to provide reasons for accepting waiver requests and not for rejecting the same[31]. This goes on to show that NOCs have unfettered powers with regard to granting and rejecting waivers. Providing reasoned decisions is one of the most important principles of justice and fairness, however, in this case, they may act according to their own whims and fancies. Lack of accountability might lead to big organisations wrongfully inducing the National bodies to get their waiver requests accepted.

Furthermore, there may be no uniformity in terms of granting waiver requests as the same may vary from one NOC to the other. This may lead to ambiguities and discrimination. Players may be expected to submit their waiver requests four months prior to the Games but, that may not be possible in situations when players are not even sure of their qualification to the games. These are some of the uncertainties and procedural flaws pertaining to the guidelines related to Rule 40. It is better to have no law at all than to have an ambiguous law as an ambiguous law leads to more litigation and circumvention.

Uncertainty is the fertile ground of pure creativity and freedom. Time and again non-official sponsors have tried to circumvent Rule 40 by exploiting the fact that the word ‘indirect association’ has not been defined under the guidelines. For example; Nike ran its “Find Your Greatness” advertisement that featured everyday athletes competing in sports in places fictitiously named London[32] Thus, Rule 40 has its own limitations and the same needs to be addressed in order to ensure that the purpose of enacting the rule is safeguarded.

The redressal to these shortcomings lies in changing the ideology of #WeDemandChange to #WeDemandBalance. There is a positive correlation between identification that a consumer has with the famous Olympic Athlete and the perceived credibility of the Olympic athlete, which will influence the intent of the consumer to purchase the item endorsed by him[33]. Hence it is indisputable that Rule 40 is an indispensable instrument to secure the interests of the official sponsors, as well as the International Olympic committee, consequently affecting the brand value and image of the Olympic Games. However, on the other hand, the rule must not indiscriminately undermine the rights and privileges of the other stakeholders who are an integral part of the Games. The dire need of the hour is to reach a golden mean and reconcile the aforementioned divergent interests.

Firstly, Rule 40 needs to be made a sound law by eliminating procedural flaws. The term indirect association needs to be clarified and broad parameters laying down its scope need to be proposed.  The time limit to apply for waivers must be reasonable. Moreover, the NOCs must be mandatorily required to provide reasons for accepting or rejecting a waiver. This ensures that relaxations provided to the athletes and the sponsors are based on non-arbitrary and legitimate considerations. Besides, there is a compelling requirement for the IOC to frame a common set of guidelines for the enforcement of Rule 40 in order to avoid jurisdiction tussles and subjectivity in decision-making.

Secondly, looking into the substantive flaws of the issue in contention, the IOC needs to allow athletes to tweet from their Twitter accounts in a manner that is not disparaging or detrimental to the image of the official sponsors. In this era where the virtual communication has become the order of the day, no ambush marketing legislation (in this case Rule 40) should act as a restraint to effective expression of thought thereby causing disruption in the nexus between the various stakeholders of the Games. This will consequently jeopardise the values and ethos that the Olympic charter stands for.

Roger Federer, one of the legendary athletes in the world of sports said, “When I think of the Olympics I only think of good things” This is also the perception that the entire world has of Olympics. Thus, it has to be ensured that the slash and parry of the battle of brands to protect the vastly lucrative commercial avenues to these spectacles do not supersede the Olympic Spirit, thereby undermining its exemplary standards and impeccable motives. Rule 40, therefore, can be explained as a necessary evil to prevent unnecessary illusion created by the unofficial sponsors who try to sail too close to the wind.

[1] Olympic Charter 2015, <https://stillmed.olympic.org/Documents/olympic_charter_en.pdf&gt;, accessed 20 August 2016

[2]Rothblum Amy Alexis, “Olympian Sponsorship Roles: Sports Identification, Credibility, and Intent to Purchase” [2014]. Theses and Dissertations. Paper 124.

[3]Andrew Jennings, The secret world of FIFA: Bribes, Vote Rigging and Ticket Scandals, (London Harper Sport, 2006.)

[4]Olympic Charter 2015, <https://stillmed.olympic.org/Documents/olympic_charter_en.pdf&gt;, accessed 19 August 2016

[5] Ibid

[6] Liz Allen, ‘Protecting Sponsors at the  London 2012 Olympics’, (2010) Sports Business and Event Management Journal

[7] Nick Mulvenney, ‘No Regrets Over ‘Twitter Games’ for IOC, (Reuters 2012) <in.reuters.com/article/olympics-twitter-day-idINDEE86U0AW20120731> accessed 18 August 2016.

[8] J Curthoys, & C Kendall, ‘Ambush Marketing and the Sydney 2000 Games Protection Act: A Retrospective’, (2001. Murdoch University Electronic Journal of Law 8(2)

[9]N Burton & S Chadwick, Ambush Marketing in Sport: An Assessment of Implications and Management Strategies, (Coventry University: CIBS. 2008)

[10] International Olympic Committee, Olympic Agenda 2020 20+20 Recommendations, (Reference Doc. 18 Nov 2014)

[11]International Olympic Committee, ‘Revenue Sources and Generation’<https://www.olympic.org/ioc-financing-revenue-sources-distribution&gt; accessed 20 August 2016

[12] Robert Passikoff, ‘Ambush Marketing: An Olympic Competition. And Nike Goes for Gold’, (Forbes 7 August 2012) <http://www.forbes.com/sites/marketshare/2012/08/07/ambush-marketing-anolympic-competition-and

nike-goes-for-gold> accessed on 11 August 2016.

[13]IdyUyoe, ‘IOC Rule 40: Olympic Sponsorship’s Achilles Heel’,(Around the Rings June 2 2016) <http://aroundtherings.com/site/1/Home&gt; accessed on 14 August 2016

[14] Robert Passikoff, ‘Ambush Marketing: An Olympic Competition. And Nike Goes for Gold’, (Forbes 7 August 2012) <http://www.forbes.com/sites/marketshare/2012/08/07/ambush-marketing-anolympic-competition-and

nike-goes-for-gold> accessed on 11 August 2016

[15] Lynn R. Kahle, Angeline G. Close, Consumer Behavior Knowledge for Effective Sports and Event Marketing’ (2011) Routledge. ISBN 978-0-415-87358-1

[16] Marc Perelman, ‘Barbaric Sport: A Global Plague’ (New York, NY: Verso 2012)

[17] Aaron Smith, ‘Introduction to Sports Marketing’  (Elsevier Butterworth-Heinemann, 2008)

[18] Department of International Cooperation and Development, Olympism in Action Sport Serving Humankind (International Olympic Committee, June 2013)

[19]Rothblum Amy Alexis, ‘Olympian Sponsorship Roles: Sports Identification, Credibility, and Intent to Purchase’ (2014) Theses and Dissertations. Paper 124

[20] Bent Flyvbjerg, Allison Stewart and Alexander Budzier, ‘The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games’(2016)  SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2804554&gt; accessed 22 August 2016

[21] International Olympic Committee, ‘Revenue Sources and Generation’<https://www.olympic.org/ioc-financing-revenue-sources-distribution&gt; accessed 20 August 2016

[22] Buckley v Seymour [1996]  679So. 2d 220- 226

[23]Gujarat Bottling Co. Ltd. v. Coca Cola Co., [1995] 5 SCC 545

[24] International Olympic Committee, ‘Olympic Principles are United Nations Principles’(UN document, 2009)<https://www.olympic.org/cooperation-with-the-un&gt; accessed 18 August 2016

[25] Universal Declaration of Human Rights (adopted 10 December 1948 UNGA Res 217 A(III) (UDHR) art 19

[26] Lucas Shaw, ‘How Social Media Is Giving NBA Rating a Slam Dunk’ (2012) (Reuters 24 February 2012) <http://www.reuters.com/article/2012/02/24/idUS140846563820120224&gt; accessed 20 August 2016

[27]Rosie Duckworth, ‘Rio 2016: IOC’s relaxation of Rule 40’ (2016) 23(2) Sports Law Administration & Practice<http://www.squirepattonboggs.com/insights/publications/2016/04/rio-2016-iocs-relaxation-of-rule-40&gt; accessed on 19 August 2016

[28]Megan Ormond, ‘#Wedemandchange: Amending International Olympic Committee Rule 40 for the Modern

Olympic Games’(2014)5 Journal of Law, Technology & the Internet<http://scholarlycommons.law.case.edu/cgi/viewcontent.cg?article=1069&context=jolti&gt; accessed 22 August 2016

[29]Alessandro Oliverio and Christopher M. Delp, ‘Olympic Rule 40 Guidelines: #WeDemandClarification’ (2015) 13(10)WSLR, <www.ecomlaw.com>accessed 22August 2016

[30]Team GB, ‘Guidelines for Non-Olympic Partners, Athletes and Agents’(Team GB Guidelines 2015) < https://www.teamgb.com/docs/default-source/default-document-library/default-document-library/rule-40-guidelines-final.pdf?sfvrsn=2&gt; accessed 21 August 2016

[31]International Olympic Committee, Use of a Participant’s image for advertising purposes during the Rio 2016 Olympic Games. Rule 40 of the Olympic Charter: What you need to know as a Participant, (IOC Guidelines 2015), <http://www.olympic.org/ Documents/Athletes_Information/Rule_40-Rio_2016-QA_ for_Athletes.pdf>  accessed  18 August 2016

[32] Megan Ormond, ‘#Wedemandchange: Amending International Olympic Committee Rule 40 for the Modern

Olympic Games’(2014) 5 Journal of Law, Technology & the Internet <http://scholarlycommons.law.case.edu/cgi/viewcontent.cg?article=1069&context=jolti > accessed 22 August 2016

[33]Rothblum Amy Alexis, “Olympian Sponsorship Roles: Sports Identification, Credibility, and Intent to Purchase” [2014]. Theses and Dissertations. Paper 124

 

Categories: Ethics and Governance, IPR

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s