The FIFA Host Selection Agreement: The Legal Framework of a Monopoly

In part 2 of my 3 part series on FIFA, the world football organization, I will take a closer look at some of the concessions countries make in order to be considered to host the World Cup. The absence of alternative supervisory bodies for the sport allows for FIFA to siphon the majority of revenue from the lucrative competition unabated, and leaves host countries with tourist activity as the major source of positive impact on their national balance sheet.

The source of FIFA's control of the cash flow brought in by the World Cup is the FIFA Host Selection Agreement. In the introduction, the agreement states that FIFA has ultimate authority in the manner in which the competition is staged and organized. The organization founded the World Cup, and as the governing body of the sport it should oversee the successful execution of the tournament.

If you invent the game, inherently you have an obligation to organize and administer related competitions.

The opportunity to exploit the tournament and the countries hosting it for its personal benefit arises in the next sentence of the introduction when it states, "FIFA exclusively and solely owns and controls on a world-wide basis any and all Media Rights, Marketing Rights, Intellectual Property Rights and all other commercial or other rights and opportunities."

I am not a lawyer, nor have I studied law extensively, but I would wager this statement alone would allow for FIFA to control the majority of revenue sources made available by the World Cup. Despite this fact, FIFA's lawyers proceed to extensively define their control of "Media Rights, Marketing Rights, and Intellectual Property Rights" to eliminate any chance of engaging in a legal battle that would require an outside interpretation of the agreement or, more consequentially, its validity.

Some of the more astonishing rights granted to FIFA by the countries who are on the ballot as candidates to host the tournament include:

• The right for FIFA to market itself and FIFA's Commercial Affiliates in any Host City Event
• Entities in competition of FIFA's Commercial Affiliates may not be granted marketing rights in Host City Events
• Commercial Affiliates in any food and beverage product category shall have a first right of negotiation and right of last refusal for the right to offer and/or sell their products at any Host City Event
• The sale of official licensed products at any Host City Event shall be exclusively conducted by the entity appointed by FIFA, with utilities and space provided on an at cost basis (tax free)
• FIFA controls naming rights of all stadiums and training sites for term of agreement
1. These rights can be granted to FIFA's Commercial Affiliates
2. FIFA has the right to determine a perimeter around sites where certain commercial activities are prohibited, and may require the removal or concealment of advertisements in competition of FIFA's Commercial Affiliates within the perimeter.
• FIFA controls ticket allocation to Host City, and tickets must be purchased from FIFA by the Host City
• The Host City cannot devote more resources to promotion of other major sporting events outside of FIFA competitions in Host City in year prior to competition period
• The Host City shall be responsible to bear all costs for the fulfilment of its obligations
• FIFA and its subsidiaries are held free and harmless from and against any tax payments and costs shall be borne by Host City

By agreeing to the stipulations listed in the Host Selection Agreement, and granting all "Media Rights, Marketing Rights, and Intellectual Property Rights" to football's governing body; the host country is ultimately allowing all revenue not related to tourism to be allocated to FIFA. Hypothetically, this allows FIFA to instigate bidding wars between potential sponsors, and therefore drive up the value of their contracts. This can range from merchandising opportunities to naming rights on stadiums; undoubtedly a highly lucrative prize for any corporation looking to capitalize on global brand recognition. Furthermore, FIFA is able to spend the 7 years that follow the announcement of the World Cup Host Country to actively promote its brand and the brands of its commercial affiliates.

The result of this agreement in 2010? Using the exchange rate between the USD and South African Rand on the day the data was published, 09/06/2010, the 2010 World Cup in South Africa made approximately $4 billion profit for FIFA. Meanwhile, South Africa generated about $1.52 billion dollars in additional revenue from tourism during the tournament, but profits totaled only about $474 million dollars, or 10% of the country's total investment.

Interestingly enough, based on the amount of resources invested in the bid process by countries, it appears that the perceived future benefits of the exposure provided by the FIFA World Cup are what drives countries to lobby so aggressively to be host the tournament. The final installment of this 3 part series will investigate whether that perception could be enough to motivate countries to try and influence the vote through unethical business practices, as well as a closer look at the decision to have the 2018 and 2022 World Cup tournaments in Russia and Qatar respectively.

- NLW

FIFA: A Monopoly on International Football and The World Cup, Part 1

This article is the first in a three part series where I will examine the FIFA World Cup Host Country Selection Process, the monopoly that FIFA has on International Football and the World Cup, and provide a critique of how FIFA's position has allowed for money to control the selection process.

In order to begin to understand the decision to have Russia host the 2018 World Cup and Qatar to host the 2022 international football championship, it is useful to be familiar with the short history of the host selection process for the tournament.

First held in 1930, the early years of the FIFA World Cup were hosted on one of two continents: Europe or South America. Only once was there a vote until 1962, and often countries had unchallenged bids as a result of opposing nations withdrawing from consideration. In a symbolic effort to foster diversity and equality in the selection process, North America was allowed to enter a bid to host the tournament, and as a result from 1962-1998 the tournament was alternated between Europe and the Americas.

In 2002 Japan and South Korea hosted the World Cup in a revolutionary move by the FIFA Executive Committee, who voted in favor of the two countries after they merged their individual bids against Mexico at the last moment; resulting in the actual globalization of the tournament. The voting process has continued up until today with subsequent competitions being held in Germany (2006), South Africa (2010), Brazil (2014), Russia (2018), and Qatar (2022).

Confused? Don't over-analyze it. I liken it to a country who operates under a theocratic government, a religion whose leader is appointed by divine intervention, or the governance of Emerald City by the Wizard of Oz.

The next logical question is "What are the criteria that eligible host countries are judged on during the selection process?" This is tough to answer. FIFA's Executive Committee never explicitly states what factors into their decision, but a close look at the Host Selection Agreement all countries must submit to be officially considered provides some "clarity" on the topic. The 60+ pages of legal jargon ultimately provides broad, completely subjective requirements for the country selected to host the FIFA World Cup, including:

• The ability to provide sites for competitions and "fan related promotional events" that adhere to the highest technological, commercial, and infrastructure international standards, and if necessary, develop existing facilities to meet these requirements
• The ability to provide utilities, parking facilities, and security/emergency services for competition related events, along with volunteer and ticket facilities near the stadiums.
• Provide one stadium per Host City, and host cities, as well as 4 potential venue-specific training sites in aforementioned cities located close to respective venue-specific team hotels (Max 20 min drive)
• Provide a traffic management plan, public transportation, emergency routes, as well as shuttle bus routes for matches and FIFA Fan Fest on match days for duration of the competition
• Provide hotels to serve as "Team Base Camps" for each participating team within 20 min of their respective training sites
• Provide established local, regional, and national communication plan to promote competitions
• AND be able to minimize environmental impact :)

Clearly, this leaves much to be desired in explaining why countries have been chosen to host the tournament in the past.

The next installment in the series will delve further into the Host Selection Agreement to reveal some "interesting" demands FIFA makes of countries wishing to be considered to host the FIFA World Cup.

- NLW

The Argument for Compensation of College Athletes and the Hypocrisy of the NCAA: The OSU Model

As a recent graduate of the University of Michigan, I never thought that I would see the day that I would offer my support to any cause associated with the Ohio State University or any of its student athletes. Perhaps even more surprising is that the player in question is Terrelle Pryor, who 3 years ago chose to attend OSU over Michigan in a devastating recruiting loss for the Wolverines football program and incoming coach Rich Rodriguez.

On December 23, 2010, Pryor and four teammates were suspended for the first five games of the 2011 season for selling awards and accepting improper benefits. Personally, I believe that college athletes need to be compensated in addition to their tuition, room, and board, an opinion that I have found to be fairly widespread amongst those who follow college athletics closely. Alas, such a model doesn't exist, so logically one would expect that the NCAA would act according to its guidelines; which appear to be subject to a loose, incident specific interpretation.

On December 29th, 2010 the NCAA posted an explanation for their decision on its website stating, "They [the Ohio State football players] indicated they were not aware there was a violation and learned of the issue based on later rules education, which was confirmed by OSU through interviews and supporting documentation."

Gene Smith responded to the NCAA's decision explaining,"We were not explicit with these young men that you cannot resell items that we give you. They stated in their interviews with us and with the NCAA that they felt those items were theirs, that they owned them, that they could sell them to help their families. … We were not explicit and that's our responsibility to be explicit."

All indications are the sale of the memorabilia and gifts were not used to "help their families", but rather in exchange for tattoos, and possibly other benefits. As former Buckeye Antonio Pittman tweeted, "Cats been getting hookups on tatts since back in '01", and there have been reports that the owner of the tattoo parlor in question has pictures of Ohio State player memorabilia on his Facebook page.

Furthermore, it seems to me that it is highly unlikely that Jim Tressell or other administrators at Ohio State didn't make clear that selling memorabilia and gifts for personal profit was a violation of NCAA rules, but I was willing to give the players the "benefit of the doubt" and consider them "innocent until proven guilty". Then an article by the OSU student newspaper came to light. The article states that former Buckeye Thaddeus Gibson, now with the San Francisco 49ers, said they were told fairly often not to sell personal items. Gibson is quoted as saying, "Oh yeah, they (OSU athletic director Gene Smith and the coaches) talked about it a lot." Later Pryor quipped, "I already knew what I shouldn't have done back two years ago".

I think the old saying goes "Where there is smoke, there is fire". This appears to be a wildfire that is quickly getting out of the NCAA's control and is tarnishing its own integrity.

Further along in the NCAA's statement, the governing body explains the decision to allow the players to play in the bowl game by saying, "It [A Student-Athlete Reinstatement Policy implemented in 2004] recognizes the unique opportunity these events provide at the end of a season, and they are evaluated differently from a withholding perspective for student-athlete reinstatement." In its conclusion to the statement, the NCAA declared, "Money is not a motivator or factor as to why one school would get a particular decision versus another."

The validity of this statement has been contradicted in a number of revelations. On December 30 PlayoffPAC, a federal political committee dedicated to establishing a competitive post-season championship for college football, declared the Orange Bowl provided a free, five-day Caribbean cruise in 2010 to 40 athletic directors, conference officials, and their wives, allegedly in violation of IRS rules. Followed by comments from Sugar Bowl CEO Paul Hoolhan in the Columbus Dispatch that he lobbied for Pryor and others to be considered for exemption to the rule, "to preserve the integrity of this year's game", and "That appeal did not fall on deaf ears".

Clearly, "Money is not a motivator or factor".

In 2006 the Sugar Bowl had a revenue of $12.9 million with its main expense being a payout of $6 million to the payout pool for BCS teams. Using the most recent CPI data to compensate for inflation, in 2011 the revenue generated can be expected to be around $14,234,000 with expenses of around $6,620,000. The rest of the revenue is distributed amongst committees for the game such as $1.3 million in employee salaries, about $453,000 to Paul Hoolihan, and $118,000 for decorations, all in 2006 dollars. In 2006, the Sugar Bowl managed to generate $1.1 million in profit, tax free. The rest of the money the schools receive are from TV and sponsorship revenue. Here lies the major problem, and likely a decisive factor for the NCAA deciding to allow Pyror and his teammates to play in the game. If they don't play, the game isn't competitive, ratings suffer, the Big Ten is further embarrassed as a whole, and the bowl loses $X amount of dollars.

Terrelle Pryor, some former OSU football players, and the local Columbus media, appear to have provided the average sports fan with a birds-eye view of the corruption and hypocrisy that exists in college athletics today. The athletes save maybe $40,000 - $50,000 a year from their scholarships, can't take advantage of their power to generate revenue because of their amateur status, and all the while the Universities and NCAA are making millions of dollars exploiting them.

Until the NCAA steps up and takes a firm stance against the practice of accepting improper benefits, or more appropriately, creates a compensation model for all athletes who participate in college athletics; the NCAA will continue to be embarrassed and face appropriate public scrutiny.