Footballing giants Liverpool FC have won a legal battle with American sportswear brand New Balance. The two have been in dispute over the interpretation of their multimillion-pound sponsorship agreement. New Balance argued Liverpool FC were contractually obliged to renew their deal because, in their eyes, they more than matched a rival offer from Nike. Nike reportedly offered £10million a year less than New Balance, but due to Nike’s global marketing appeal, the Court found New Balance were in fact unable to match that offer. Liverpool FC were cleared to enter into a new contract with Nike. New Balance have appealed.
This case shows how performances on the pitch can affect commercial relationships. Liverpool’s recent success has led to a scramble to supply their kits and allowed them to secure a better deal. Compare that to North West rivals Manchester United who are reportedly on the verge of losing title sponsor Chevrolet because of recent poor performances.
Sponsorship has come a long way since Kettering Town FC pioneered shirt sponsorship in 1976 with a local tyre supplier splashed across their shirts. The Football Association initially blocked the idea but relented a year later. Now every inch of a shirt is sponsored!
Of course, sponsorship isn’t just about football! Brands are recognising the power of marketing in all sports and levels.
In our social media world, sports people and ‘influencers’ are entering legal agreements every day to promote goods and services. These deals can be made so quickly, it’s tempting to continue without a written agreement. We would advise against this laid-back approach, particularly if you would like a long-term relationship with that brand.
So if an agreement is sent to you, what should you look out for? Campbell McKellar, a Solicitor in our Company and Commercial team, lists some important considerations:
Obligations on the brand:
• What do you want to get out of the deal?
• Are you prepared to accept some “free” products or do you also want to negotiate a fee to be paid to you? How would this fee be
paid – will there be performance criteria and if so, do you think they are achievable?
• Does the brand have the financial means to meet any agreement with you? Should you ask for any fees upfront?
Obligations on you:
• Are your obligations defined well enough in the agreement? Will you be required to simply wear the products or will you have to actively promote
them on social media and at events?
• Does your sport allow you to fulfil the requirements of the brand? Will you be allowed to wear any other brands at the same time?
Will you have to cover up other brand names, even if they do not sponsor you?
• Do you have to use the products at specified times and for specified competitions?
• How much control will the brand have over you?
• Will your obligations contravene with advertising standards?
• Are your future aspirations considered in the agreement?
• Does your club or association have preferred kit suppliers or sponsorships of their own?
• Will your personal sponsorship land you in trouble with your club or association?
• What duration does the agreement cover?
• Does it automatically renew on certain events? Are those events realistic?
• Are there agreed increase or reduction clauses that mean the value of your sponsorship can change on certain events? For example, will you receive a bonus for winning player of the month? Will you suffer a penalty for disciplinary issues? Who decides in the event of a dispute?
• How can you or the brand terminate the agreement? Will there be any penalties for cancellation? How much notice should be given?
• Does the brand have the right to match any competing offers? If so, is the agreement specific enough to avoid the type of dispute between Liverpool FC and New Balance?
• Thought should be given to use of the brand’s logo– could you unknowingly be infringing someone else’s rights to that logo?
• Will the brand have the rights to use your name and image?
Whether it is your first sponsorship deal or your 100th, it pays to take specialist legal advice to ensure your interests are protected.
MEADE KING - MAKING IT CLEAR