Italy: Serie A’s Soccer Teams in Troubles and TV Rights

Last Updated: 25 May 2006
Article by Francesco Portolano and Ernesto Apa

All Italian press and soccer fans and politicians are presently debating what is called "Calciopoli" (roughly, "Soccergate"), the big scandal in soccer arisen from the wire-taps. Maybe lawyers should be focusing on it too!

The story begins when prosecutors started secretly registering mobile telephone conversation of many key-men of the Italian soccer, including Antonio Giraudo, CEO of Juventus, and Luciano Moggi, Team Manager of Juventus. Moggi and Giraudo in particular were deemed, also before the wire-taps, the most powerful soccer managers in Italy.

The content of the wire-taps, as reported by Italian press, appears to describe what Italian press has labelled as the "Moggi System": a network of contacts apparently including the heads of referees, referees, journalists, sports agent, etc. According to the prosecutors and the press, this network was headed and controlled by Mr. Moggi, who through this network allegedly influenced even the result of the Italian Serie A Championship. In addition to Juventus, Soccergate may involve many other important soccer teams: some deemed to have a major role (like Lazio, Fiorentina, etc.) and some with a minor role (or as victims, like Milan). As said, however, Juventus’ position has been deemed as the most critical.

Juventus, owned by Agnelli family – owners also of FIAT - is the most prestigious Italian soccer club: it won this year’s championship (for the 29th time in its history, an absolute record), and has never demoted to Serie B (the second division of the Italian soccer championship). All this could now change, as the win could be overridden and Juventus faces the risk of being demoted to Serie B.

Since Soccergate has begun, Juventus has changed its entire board of directors, Franco Carraro resigned as chairman of FIGC (Italian Soccer Association) and has been replaced by a Special Commissioner (Guido Rossi, an authoritative business lawyer and professor of law who has never been involved in soccer before), and Juventus, Lazio and Fiorentina risk to be removed from Serie A.

Assuming the Soccergate will be proved true, a host of legal conflicts would arise. One which has already been discussed on newspapers (and certainly already by in-house legal teams) is the destiny of all those contracts between the above soccer teams risking of being demoted and their sponsors, and the media companies, and merchandising agencies, etc. That is, all those companies which in some way or another have bought "the image" of Juventus to exploit it for commercial purposes.

In particular, the most economically relevant contracts would be those regarding TV rights. TV broadcasting rights account for more than 50% of aggregate soccer revenues. Juventus TV rights in turn account for approximately 7% of aggregate soccer TV rights revenues.

Pursuant to law no. 78 of 1999, each Serie A team is entitled to pay-TV rights for its home matches. This allows each team to exploit pay-tv rights on its home matches, increases the economic power of the most important teams, whose matches are most valuable. Less prestigious teams obviously do not like this system. According to the smaller teams, to ensure a level playing field, TV rights have to be collectively managed, with revenues distributed among all teams, taking into account each teams prestige, successes, etc.

Sky, the pay-tv satellite platform controlled by Rupert Murdoch’s NewsCorp, paid Eur 190 millions for the pay-tv rights on Juventus’ home matches for two seasons: the 2005-2006 season, just finished, and the next season (2006-2007).

In January 2006 Mediaset (the main Italian TV private network) bought pay-tv rights on the Juventus’ home matches on all platforms for the 2007-2008 and 2008-2009 seasons for a Eur 218 millions consideration. For other Eur 30 millions Juventus granted to Mediaset an option on 2009-2010 season’s matches: if Mediaset exercises the option, it shall pay other Eur 113 millions for the third season. Mediaset will broadcast Juventus’ home matches by pay-per-view digital terrestrial television; moreover, it has sub-licensed to Sky the satellite rights on the same matches for Eur 157,3 millions.

According to "Il Sole 24 Ore", the main and authoritative Italian financial newspaper, if Juventus is demoted to Serie B, the value of Juventus’ TV rights could decrease by approximately 60%.

License agreements between television networks and Juventus apparently do not provide any termination or penalty clause for the unthinkable: demotion of Juventus from Serie A for disciplinary reasons.

What then, if the unthinkable becomes true, about these TV rights, which may become terribly expensive? Absent a contractual termination clause, then what other remedies would be available for the television operators which bought rights on Juventus’ matches (or for sponsors, merchandising agencies, etc.)?

Section 1467 of the Italian Civil Code states that "if extraordinary and unforeseeable events make the performance of one of the parties excessively onerous, the party who owes such performance can demand the termination of the contract." So, this rule entitles one party to terminate a contract as a remedy to a subsequent economic imbalance between the obligations of the parties of a contract.

The contracts between Juventus and the broadcasters do include a clause on general demotion to Serie B. Without this clause, if Juventus had been demoted "on the field" (the four teams at the bottom of the ranking are removed from Serie A to Serie B and are replaced by the four teams at the top of Serie B), the remedy of excessive onerousness should have been deemed not applicable. Although unlikely for Juventus, a Serie A team can always end up in Serie B for a very bad season (as the saying goes: on any given day, any given team …).

With reference to Soccergate, the applicability of "excessive onerousness" remedy depends on whether Soccergate is deemed an "extraordinary and unforeseeable event". TV networks should ask to the Court to order the termination of the contract which has become too onerous. Juventus could avoid termination by offering to modify the terms and conditions of the contract.

However, one may say that Soccergate is not an "extraordinary and unforeseeable event", since Soccergate (if proven true) actually is generated by Juventus itself (through its representatives). So, termination for excessive onerousness could in this case not be applicable.

In the case of Soccergate, the likely exclusion of Juventus from Serie A could be deemed chargeable to Juventus only. Therefore, Juventus could be excluded from Serie A if the behaviour of its managers is deemed (i) illegal under the FIGC rules and (ii) chargeable to Juventus.

Therefore, if it is ultimately confirmed that Juventus breached FIGC rules, remedies for breach of contract should remain available. That is, Juventus could be deemed liable (vis-à-vis TV networks, sponsors, etc.) for the damages that are caused by "its" illegal behaviour. This could apply also to cover the decrease of value of the TV rights bought by Mediaset and Sky, as well as loss of profits (which may be recoverable in certain cases under Italian law).

Likely, to avoid being sued, Juventus will negotiate new agreements on TV rights. This time, the broadcasters will be sure to add a clause on disciplinary sanctions since on any given time any given team …

… can be demoted for disciplinary reasons.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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