Sports law insights: Restraint of trade

Where a contract exists, and even in the absence of one, the common law doctrine of restraint of trade provides an avenue through which the decisions of a sports governing body can be challenged. This doctrine asserts that rules or actions restraining trade (meaning denying or restricting the opportunity to earn a living) are void unless they can be justified.

Traditionally, governing bodies have argued that restraints are justified, inter alia, with reference to the need to: promote competitive balance; incentivise youth development, encourage solidarity between participants; maintain the integrity, stability and proper functioning of competitions; protect national teams; and maintain the commercial viability of sport. The doctrine requires that restraints are reasonable not only in the interests of the parties imposing the rule, but also proportionate and in the wider public interest. Restraint of trade has been raised by both clubs and players. In Stevenage Borough Football Club v Football League Ltd (1996) 9 Admin LR 109, the club, having won their respective league, challenged the Football League’s refusal to grant the non-league club promotion to the Football League. In Eastham v Newcastle United FC & others [1964] Ch. 413 the Chancery Division of the High Court ruled that the ‘retain’ element of the English retain and transfer system substantially interfered with the player’s right to seek employment and therefore operated in restraint of trade.

Finally in Greig v Insole [1978] 1 WLR 302 the Chancery Division of the High Court held that a retrospective rule, banning Greig from playing English County and Test Cricket after signing a contract to play in the World Series Cricket, was also an unlawful restraint of trade.