MasterCard filed suit against FIFA in the Southern District of New York. FIFA had inked an exclusive sponsorship deal with Visa for the 2010 and 2014 World Cups when MasterCard thought it had first option. What was the verdict? Nick Johnson reports.
Who: FIFA, Mastercard, Visa
Where: New York, USA
When: 7 December 2006
Four senior employees at FIFA, the world soccer federation, have been dismissed following the judgment issued by US District Judge Loretta A. Preska in New York on 7 December 2006. The judgment contained stinging criticism of FIFA, concluding that the governing body had lied repeatedly to both MasterCard and Visa in the context of negotiations for a sponsorship agreement. (See http://www.nysd.uscourts.gov/rulings/06CV03036_findings_20061206.pdf for the full 125-page judgment.)
Referring to FIFA's slogan "fair play", the judge stated that FIFA's dealings with its 16-year partner MasterCard "constituted the opposite of fair play". She held that FIFA had "lied repeatedly to MasterCard, including when they assured MasterCard that, consistently with MasterCard's first right to acquire [the sponsorship rights], FIFA would not sign a deal with anyone else unless it could not reach agreement with MasterCard". MasterCard's right of first refusal was drafted as follows:
"9.2 In the event that MASTERCARD has not materially breached this AGREEMENT, MASTERCARD will have the first right to acquire, with respect to PRODUCTS, the package of advertising and sponsorship rights offered by FIFA, if any, in connection with the football competitions that are the subject of this AGREEMENT and which will be held during the period 2007-2010. Such right is to be exercised by MASTERCARD within ninety (90) days of receipt of the written offer from FIFA setting out the terms and consideration payable for such package of rights. Thereafter, FIFA will be free to grant to any entity such rights on comparable terms for such football competitions with respect to PRODUCTS. Ninety (90) days prior to FIFA sending MASTERCARD the written offer detailed above, FIFA shall notify MASTERCARD, in writing, that it intends to send out such an offer."
The judge also held that FIFA had lied repeatedly to Visa when Visa asked, at various stages, whether MasterCard had any incumbency rights.
The judge ordered a permanent injunction, prohibiting FIFA from proceeding with the deal it had inked with Visa and requiring FIFA to grant MasterCard the sponsorship package FIFA had previously offered it.
Why this matters
The judgment has given FIFA's reputation a significant knock. The testimony of many of FIFA's representatives was found to be unreliable (with one being found to be "generally without credibility") and the judge concluded that a date on the FIFA/Visa sponsorship agreement had been falsified by someone at FIFA. Referring to a critical moment in a tape recording of a FIFA Finance Committee meeting where the sound recording goes completely dead, she also noted that "FIFA has provided no explanation for the mysterious gap in the audio recording".
FIFA has indicated that it intends to appeal the decision. However, it looks likely that any appeal would solely be about FIFA's reputation (and its legal costs) rather than to undo the injunctions ordered by judge Preska. With this sponsorship package due to commence on 1 January 2007 and bearing in mind the damage that must have been done to the relationship with Visa, it looks like the 2007-2014 payment solutions category sponsorship will now remain with MasterCard. One suspects this is a relationship that sponsor and rights holder may now have to work at!