Australia: Play to win – minimising risk in sport sponsorships

Many community and professional sport clubs as well as athletes rely on sponsorship as a matter of survival to fulfil their goals and objectives. Sponsorship can assist with profile-building, increasing market presence and sales, and represents an essential funding mechanism for many sports clubs and athletes.

This article provides an overview of the sport sponsorship relationship, ways of minimising party risk in sponsorship arrangements, and addresses recent developments which suggest commercial sponsors are moving away from only seeking brand exposure, to ensuring their investments are socially responsible and where possible guarantee a sustainable return. By the same token, we explore how those sponsored (sponsees) appear to be becoming more cautious before committing themselves to sponsorship arrangements.

The sponsorship relationship

Sponsor vetting

Sponsees and sport governing bodies will typically vet potential sponsors before agreeing to formal sponsorship arrangements. This is done to ensure sponsors are appropriately aligned to the values of the sponsee, the relevant sport and its consumer base.

For example, the Women's FIFA World Cup had a planned sponsorship with Saudi Arabia entitled 'Visit Saudi', but that was scrapped earlier this year after concerns were raised by several participating nations that the sponsorship was problematic in light of Saudi Arabia's poor track record regarding gender equality. This demonstrates that despite the present economic climate, sponsees actively can and do turn down sponsorship opportunities where values and interests do not align.

Defining the relationship

The sponsorship relationship is a collaborative relationship (usually governed by a sponsorship agreement) whereby a sponsor supports an organisation or individual through the provision of money, products, services or other type of benefit.

The sponsor usually receives certain rights or benefits in return for their investment. For example:

• Stadium, matchday or league naming rights – which may heighten consumers' familiarity and sense of association with the sponsor brand
• Logo placement on jerseys and other equipment – which may elevate brand affinity and foster emotional connections that drive customer retention, new acquisitions, or a willingness to pay a premium for sponsor products and services.

Examples of sponsorship

At the time of this article, some examples of sponsorship arrangements include:

• Emirates and Arsenal Football Club, who have a jersey partnership until 2028
• Modelo as official beer of the UFC, has in-venue, digital and retail platform signage rights
• Nike sponsors numerous athletes including LeBron James and Nick Kyrgios
• Telstra has naming rights to the NRL
• Crypto.com has naming rights to F1's 2024 Miami Grand Prix.

Sponsor and athlete activism

Sponsors, sponsees and athletes are increasingly adopting non-neutral stances and acting on their views regarding socio-political issues. Over the previous decade, Lance Armstrong's doping scandal, Tiger Wood's infidelity, David Warner's involvement in 'Sandpapergate' and Israel Folau's free speech battles, have made sport sponsors increasingly cognisant of the need to control and safeguard their own sponsorship investments. Where necessary, this includes robustly asserting their own interests ahead of those of sponsees and athletes. Examples include:

1. The 2019 Israel Folau case. Barrister Jeffrey Phillips suggested at the time it could be argued that the severing of Folau's Rugby Australia contract was at the behest of sponsors, which if proven could raise "prospects of interference with contractual relations and aspects of Australian competition and consumer law, in particular s 45D dealing with secondary boycotts". However, this matter ultimately settled and that line of argument was not pursued any further.
2. In 2022, Chelsea Football Club's shirt sponsor Three going as far as temporarily suspending its multi-year deal with the club, requesting its logo be removed from the club's kit and the club's Cobham training base, after Roman Abramovich (a Russian citizen) was sanctioned by the UK government due to alleged ties with Vladimir Putin.

Noting this, athletes have 'found their voice' in recent times. For instance, mining company Hancock Prospecting pulled out of its $15 million deal with Netball Australia in late 2022, after an Indigenous player (Donnell Wallam) objected to wearing a uniform bearing Hancock Prospecting's logo, due to the company's comments on Indigenous people back in the 1980s.

Sponsor and athlete compliance with competition rules

Sport sponsors do not just need to be aware of the actions and views of sponsees (and where applicable, their contracted athletes), they also need to be careful not to breach the rules of a sport competition or league through ambush marketing tactics. For example, the AFL in Australia, UEFA in Europe, and FIFA on an international scale for the World Cup, have specific regulations and guidelines on sponsor advertising. This includes the requirement to obtain permission to become an approved sponsor and what logos can appear on playing kits. Failure to comply can result in costly sanctions or fines.

Examples include:

1. Denmark striker Nicklas Bendtner was charged a €100,000 fine by UEFA for infamously wearing his so-called 'lucky' underpants in a EURO 2012 clash against Portugal. To the shock of fans, after scoring a goal Bendtner dropped his kit shorts slightly to reveal a pair of green boxer shorts with the name of the betting company 'Paddy Power' written on them. Whilst not a sponsor of the EURO 2012 tournament, as a gesture of goodwill Paddy Power volunteered to pay the fine on behalf of Bendtner, who was ultimately held responsible for intentionally revealing the brands' name, without having obtained UEFA's prior permission.
2. During the 2022 Qatar World Cup BrewDog (a Scottish brewery) proclaimed itself, through a series of physical billboards and online posts, the "Proud Anti-Sponsor of the World F*Cup", and published several other slogans including "Eat, sleep, bribe football" and "The Beautiful Shame". Despite BrewDog having flown close to the sun (with it being arguable that members of the public could have been misled that BrewDog was an official sponsor of the FIFAWorld Cup), BrewDog was careful to only reference the 'World Cup', avoiding the acronym 'FIFA', which is protected as a registered trademark.

What to include in a sponsorship agreement

A well-drafted sponsorship agreement:

• Adequately protects the legitimate interests of both the sponsor and sponsee
• Helps to mitigate any party risks
• Minimises the scope for misunderstandings and costly disputes.

Key items to consider as part of a sponsorship agreement are:

As noted in this article, the sport sponsorship relationship is multi-faceted, involving a variety of different elements and considerations that go beyond just financial support and investment.

The success of the relationship therefore also depends on reaching a mutual understanding of each party's obligations and shared commitment to achieving certain objectives or milestones. For reasons of clarity and certainty, it is important to formalise the relationship in a sponsorship agreement. Please get in touch if you have any sponsorship or intellectual property related queries.

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.