After a spate of sports cheating stories in the press, the European Sponsorship Association has called for sponsors to help clamp down on dodgy dealing by introducing extra protection in sponsorship contracts. ESA Board member Nick Johnson blows the whistle.
Topic: Sponsorship
Who: European Sponsorship Association
Where: Europe
When: October 2009
Law stated as at: 3 November 2009
What happened:
After a spate of sports cheating stories in the press, the European Sponsorship Association (ESA) has called for sponsors to help clamp down on dodgy dealing by introducing extra provisions in sponsorship contracts.
The call is linked with a stark warning to sports governing bodies and rights holders of the threat to future potential sponsorship funding if acts of cheating are seen to persist within sport. The succession of recent cheating allegations in high profile sports will impact significantly on these sports, as sponsors assess their position, and evaluate the potential damage to their brand image of being associated with individual sports stars and teams who are found guilty of cheating.
The sponsorship industry has grown dramatically over recent years as major companies and brands look to associate themselves with high profile sports. The industry is now worth £7 billion annually to sport across Europe. In recent years there have been remarkably few situations where sponsors have decided to end their contracts with rights holders because of some form of misdemeanour within the sport. There have been examples of sponsors withdrawing funding in high profile sports such as athletics and cycling as a result of athletes testing positive for drugs. However, the events within the sporting world over the last few months will clearly raise new questions among sponsors about the integrity of certain sports.
In ESA's view, those individuals and teams within sports that have been found guilty of cheating need to be punished and if sponsors also start to turn their back on these sports then the penalties will extend to significant financial loss.
Chairman of ESA, Karen Earl commented, “Sponsors quite rightly are highly sensitive about their brands and their ability to protect them. Over the years, sponsors have been extremely loyal and have provided an invaluable income stream for sport.
However, sponsors are becoming increasingly selective and demanding about the returns and standards they expect. Like the fans watching live at events and on television, sponsors will start to feel cheated and will certainly not want to have their brand linked with a sport, a team or individuals who have deliberately cheated in order to win.”
“We will be advising our sponsor members to include extra clauses within their sponsorship contracts to provide them with extra protection. This will put more pressure on the sports governing bodies and rights holders to ensure that they do everything in their powers to eliminate cheating”.
Why this matters:
Drug abuse and match fixing scandals have cast shadows over sport in recent years. However, exposure of wrong doing has generally come some considerable time after the events have taken place and often without a conclusive outcome. Ever increasing rewards within sport have taken cheating to new levels but improved technology and more detailed examination from different parties are now beginning to lead to quicker and more conclusive exposure of the cheats. This should greatly strengthen the position of sponsors, enabling them to react appropriately and making rights holders much more accountable.
However, sponsors need to ensure that their contracts give them adequate termination and suspension remedies. They would also be wise to include where possible provisions in their contracts with governing bodies and other rights holders requiring them: (a) to operate and maintain stringent procedures for detecting and clamping down on cheating; (b) to have in place the resource to investigate allegations quickly and effectively; and (c) to notify the sponsor confidentially as soon as any potential issue is identified.
(Osborne Clarke partner Nick Johnson, the author of this article, is a director of the European Sponsorship Association.)
