Legal certainty for the 50+1 rule: DFL Executive Committee adopts proposal to submit to the German Federal Antitrust Office
- No further exemptions from the 50+1 rule to be provided
- Protection of status quo under certain conditions for previous clubs with benefactor exemptions
8 March 2023 – With the aim of further enhancing the legal certainty of the 50+1 rule and dispelling any provisional concerns under competition law that the Federal Antitrust Office may have about the overall rule (basic 50+1 rule in conjunction with the benefactor exemption regulation), the Executive Committee of the DFL Deutsche Fußball Liga has unanimously agreed a proposal regarding commitments. This proposal has now been submitted to the Federal Antitrust Office. Among other things, the proposal entails that there will be no further benefactor exemptions from the 50+1 rule in the future. For the clubs that have already been granted a benefactor exemption based on the relevant articles of association of the DFB and the DFL, it is planned to protect the status quo, subject to certain conditions. The objective of these conditions is to ensure that the design of the benefactor exemptions is more consistent with the basic 50+1 rule. The next step will see the Federal Antitrust Office consult the third parties involved in the proceedings and assess the proposal.
The examination of the rule by the Federal Antitrust Office goes back to an initiative presented by the DFL Executive Committee on 18 July 2018. The committee submitted a request to the Federal Antitrust Office for a decision in accordance with Section 32c of the German Act against Restraints on Competition (GWB), asking it to examine potential concerns regarding the 50+1 rule and its application and interpretation under competition law. The starting point was a general opinion ascertained at the Members Assembly of 22 March 2018, when a majority of the clubs had voted in favour of a motion asking for a “process for improving the legal certainty and other considerations concerning changes in general conditions while retaining the 50+1 rule”.
The Federal Antitrust Office discussed its provisional assessment at a meeting with representatives of the DFL on 31 May 2021 and then also sent it in writing to the DFL and the third parties involved in the proceedings at that time. The letter stated, among other things: “While taken on its own, the basic rule would potentially be neutral under competition law because of the sport policy objectives it pursues. However, this outcome is not produced when it is seen in conjunction with the benefactor exemption.”
This provisional assessment was followed by intensive but constructive exchanges between representatives of the DFL Executive Committee and the DFL, the benefactor clubs and the Federal Antitrust Office. In the view of the DFL Executive Committee, the goal continues to be to develop solutions in conformity with competition law that protect the basic 50+1 rule and thus actually achieve the objective of “improving legal certainty”, on the basis of the applicable articles of association of DFL e.V.
Should the proposal be declared binding in accordance with section 32b GWB following the current assessment and consultation process, and should the DFL Members Assembly agree by a decision adopted by a two thirds majority to amend the articles of association of DFL e.V. accordingly, the provisional concerns of the Federal Antitrust Office would be dispelled, and the objective of the DFL Executive Committee’s original application to the Federal Antitrust Office would be achieved.
The key points of the proposal submitted by the DFL Executive Committee that aim to increase the legal certainty of the 50+1 rule include:
- The option of obtaining a benefactor exemption from the 50+1 rule will be deleted from the articles of association of DFL e.V. in future.
- The clubs that have been granted a benefactor exemption in the past (Bayer 04 Leverkusen, TSG Hoffenheim, VfL Wolfsburg) can still obtain a licence to take part in the Bundesliga or Bundesliga 2 in the future with a view to protecting the status quo. This protection of the status quo will be granted only under certain conditions. These include the following changes in the 50+1 rule:
- The benefactor club will have an obligation towards the members of its former parent club to allow participation and to act transparently. The specific proposal to this effect states that the parent club must be granted the right to delegate at least one representative to the corporation’s supervisory body that is furnished with monitoring and approval powers. This representative must enjoy the full rights of a member of this body or of a shareholder – including in particular the right to speak, the right to access and request information as well as the right to vote.
- Because of the importance of features that establish the identity of a club, for example decisions relating to the club name, logo or colours, its headquarters or a significant reduction in the number of standing areas in the stadium, a decision may be taken only with the approval of the supervisory body or the shareholders’ meeting. The representative of the former parent club has a right of veto here – changes thus cannot be adopted if the representative votes against them.
- With regard to existing profit-and-loss transfer agreements, compensation will be paid if losses are compensated by the controlling benefactor during the period under review (similar to UEFA regulations: three years) and this compensated loss exceeds a threshold of 7.5 per cent of total revenue. Compensation has to be paid (in the amount of the relevant 12-month Euribor interest rate plus one percentage point) for any sum exceeding this threshold.
- With regard to a silent partnership involving a controlling benefactor/majority shareholder, compensation is paid if, during the period under review (similar to UEFA regulations: three years), the majority shareholder and/or an affiliated company compensates a loss incurred by the corporation or shares in losses as a silent partner through contributions paid after approval of the exemption from the 50+1 rule and this compensated loss exceeds a threshold of 12.5 per cent of total revenue. Compensation has to be paid (in the amount of the relevant 12-month Euribor interest rate plus one percentage point) for any sum exceeding this threshold.
TSG Hoffenheim and Mr Dietmar Hopp announced on 1 March 2023 that Mr Hopp would like to surrender the approval of exemption from the 50+1 rule that was granted with effect from 1 July 2015 and assign the majority of his voting shares back to the club without compensation, as a result of which TSG would return to the group of “50+1 rule clubs”. TSG Hoffenheim will remain subject to the proposed commitments until this reassignment has been effectively completed.
What is the 50+1 rule?
The 50+1 rule forms part of the articles of association of DFL Deutsche Fußball Liga e.V., the association of the 36 professional clubs in Germany.
Many of the clubs outsourced their professional football operations to corporations. The 50+1 rule incorporated in article 8 of the articles of association of DFL e.V. stipulates that a corporation of this kind can acquire a licence to participate in the Bundesliga or Bundesliga 2 only if the relevant parent club holds a majority interest in the corporation, i.e. no less than 50 per cent of the voting shares plus at least one more voting share at the meeting of the shareholders participating in the corporation. In short: the majority of votes must be held by the parent club. The DFB uses an identical regulation for the 3. Liga.
The 50+1 rule was introduced in 1998 when the match operations of the licensed leagues were opened up to corporation in accordance with a resolution of the DFB Bundestag. The objective behind this opening up was “to enable licensed clubs to convert their licensed match operations into a corporation” and thus to tap “financing opportunities on the capital market” or “the binding involvement of sponsors and other interested parties in the organisation”. As central goals of the 50+1 rule that was adopted at the same time, the DFB specified at the time that “the organisational link between competitive sport (licensed teams) and amateur sport” remained “guaranteed” and that “the outsourcing” had to be designed “to be as neutral as possible for the competitive situation of the Bundesligas and the association structures”.
If – as is the case with many Bundesliga clubs – the licensee is incorporated in the legal form of a partnership limited by shares (KGaA), the parent club or a subsidiary fully controlled by the parent club has to hold the position of the general partner of the KGaA, in accordance with the articles of association of DFL e.V. In the case of a KGaA, the parent club can hold a share of the votes that is less than 50 per cent if it is otherwise ensured that it holds a comparable position as a majority shareholder in the corporation. This requires in particular that the general partner is unconditionally entitled to the authority to transact business and represent the company granted by virtue of the law.