Thursday, August 11, 2016

Cricket, Competition and Conflict of Interest

Guest Post by Prashant Narang

72. It is common ground that the validity of the impugned amendment to Rule 6.2.4 shall have to be tested on a threshold basis viz. (i) whether the amendment is made by the authority competent to do so; (ii) whether the authority competent to bring about an amendment ha followed the procedure prescribed for the same; and (iii) whether the amendment falls foul of any statute or principle of law, violation whereof cannot be countenanced.

Let’s begin with clarifications – this “amendment” is not strictly an amendment in the legal parlance; rule 6.2.4 is not a “law” and the “authority” is not either “state” or “other authority” under Article 12 of the Constitution of India as held by the Supreme Court in Zee Telefilms Ltd and Anr. Vs. Union of India (WP(c) 541 of 2004, decided on 2.02.2005) and then in the abovementioned case BCCI and Ors. V Cricket Association of Bihar and Ors. Yet this three-point test would sound familiar to constitutional experts. Although the contention and conclusions around jurisdiction of high courts over BCCI may not be undisputed, I skip that part for now and instead focus on question (iii) raised by the Supreme Court as quoted above. Before that, here is the context.

Rule 6.2.4 before the amendment was: No Administrators shall have, directly, or indirectly, any commercial interest in the matches or events conducted by the Board. The amendment added: excluding events like IPL or Champions League Twenty 20.

It was contended by the appellants that the underlying intention behind this amendment was to protect the grant of Chennai Super Kings (CSK) to Mr. Srinivasan’s Indian Cements Ltd which otherwise would have been a clear breach of the rule 6.4.2 since Mr. Srinivasan was the President of BCCI as well as the Vice-Chairman and Managing Director of Indian Cements Limited.

The Court noted that the amendment had not been questioned for violation of the Tamilnadu Registration of Societies Act or for that matter, any other Act and goes on to find violation of principle of natural justice and public policy. Again, I reserve my comments on this part and I argue that the appellants could have contended violation of competition law in addition. Or the Court could have suo moto referred this matter to the Competition Commission under section 21(1) of the Competition Act, 2002 (‘Act’).

The obvious objection would be: BCCI is a private non-statutory regulator and the rule in question is not about the business activity, but about regulating conduct of its staff. For example, the rule is not about broadcasting rights, ticket prices or contracts with equipment vendors. The rule is at best a prevention-of-conflict-of-interest rule. Sports associations have been subject matters of the Competition regulators in other jurisdictions as well, especially in cases of broadcasting rights and access to tickets (Budzinski, Oliver. "The institutional framework for doing sports business: Principles of EU competition policy in sports markets." International Journal of Sport Management and Marketing 2 11.1-2 (2012): 44-72.).  But here, the question is of ethics and integrity.

Well, the question is indeed of competition law if this impugned amendment to rule 6.4.2 causes or likely to cause an appreciable adverse effect on competition within India as per section 3 read with section 19(3) of the Act. Simply, a safeguard preventing conflict of interest is being diluted vide this amendment. The consequence that any administrator involved in the functioning of BCCI can then have stake in IPL franchisees would obviously lead to collusive bidding, bid rigging [section (3(3)(d)] as well as limiting or controlling “production, supply, markets, technical development, investment or provision of services” [section (3(3)(b)]. Who would like to invest in cricket in India if the administrators collude with Team franchisees? Further, an umpire cannot be a player in the same match because if allowed to play, the umpire would have an incentive to decide in his favour to the detriment of other players. This kind of conflict of interest would be antithetical to competition since the regulator will have discriminatory treatment towards some franchisee over others. It would encourage financial, ethical and legal misconduct and impropriety. And it did. Mr. Gurunath Meiyappan – the son-in-law of Mr. N. Srinivasan and a team official of Chennai Super Kings (owned by India Cements Limited) was held guilty of spot fixing/ betting. There were further allegations against Mr. N. Srinivasan that he hastily set up a probe committee which was not strictly as per the BCCI, in order to give clean chit to his son-in-law. Also, Mr. Srinivasan gave a false deposition before the probe committee that Mr. Gurunath had nothing to do with the cricketing affairs of CSK but the probe committee found out that he was a team official having access to sensitive team information not available to a mere cricketing enthusiast. Interestingly, the amendment was moved in the same General Body Meeting on 27.09.2008 when Mr. N. Srinivasan was elected as the Secretary of the BCCI. It is on the record that the amendment was moved in an improper manner – without any notice, recommendation and agenda item. The judgment dated 22.01.2015 also briefly mentions another contention that the amendment was passed to neutralise another challenge in for of a suit filed by one Mr. Muthiah over the question of conflict of interest. These facts indeed deserved a CCI inquiry.

Similarly cases involving broadcasting rights can now be dealt under section 4 of the Act. Courts do not have to set up special committees for investigation and reforms, particularly when the legislature has provided for this Act. The Act has provisions for investigation as well as adjudication. Although the Act provides for suo moto inquiry as well but since these matters mostly land up in the constitutional courts first, CCI may hesitate in interfering with ongoing litigation. Therefore courts should pro-actively defer these matters to CCI instead of passing extensive directions.

(The author is an Advocate with the Centre for Civil Society, Delhi)
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