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