Adidas-Salomon Ag v Drape & Ors

At the summary-judgment stage, a claim under Articles 81 and 82 of the EC Treaty should proceed where it has a real, even if modest, prospect of success and raises materially disputed questions of mixed law and fact. The sporting exception is narrowly construed. Rules made by sporting bodies may fall within competition law where they regulate the economic value or commercial promotion of tournaments, even though they also pursue sporting objectives. A regulatory body cannot rely on domestic supervisory principles to avoid scrutiny under directly effective competition rules. Evidence that a dress code may be applied discriminatorily can justify interlocutory relief. The court should preserve the pre-dispute position where damages are inadequate, the balance of convenience favours relief, and there is a serious issue to be tried.

Adidas challenged decisions of the Grand Slam Committee and the International Tennis Federation treating its 3-Stripes design as a manufacturer’s identification subject to tennis tournament dress-code restrictions. It alleged that the decisions were agreements or decisions of associations of undertakings contrary to Articles 81 and 82 of the EC Treaty, particularly because comparable design elements used by competitors were not treated in the same way.

Most defendants applied under CPR rules 3.4(2)(a) and 24.2(a)(i) to strike out or obtain summary judgment. Adidas also sought interlocutory injunctions pending an expedited trial. The central issues were whether the claims had a real prospect of success, whether the sporting exception excluded the dress-code rules from Community competition law, and whether interim relief was appropriate.

1. Summary judgment. The claim based on the alleged insufficiency of the grace period was effectively abandoned and was summarily dismissed. The remaining Article 81 and Article 82 claims were not struck out or summarily dismissed. Under CPR rule 24.2(a)(i), the question was whether Adidas had no real prospect of success. That test is wider than the pleading test under rule 3.4(2)(a), but the court should not conduct a mini-trial. Questions of mixed law and fact, particularly under Articles 81 and 82, may require a full trial.
2. Sporting exception. The European authorities establish that sport is subject to Community law insofar as it constitutes an economic activity, and that any sporting exclusion must remain limited to its proper object. Professional sport may involve closely related services falling within the Treaty. The dress code could form part of the economic activity of promoting tournaments because restricting on-court advertising was directed to preserving their commercial appeal. It was not indispensable to playing tennis that a player’s clothing should not identify its maker. Adidas therefore had a real prospect of showing that the dress code fell within Articles 81 and 82.
3. Regulatory discretion. Bradley v The Jockey Club [2005] EWCA Civ 1056 did not prevent scrutiny under directly effective competition rules. If the defendants were undertakings to which Articles 81 and 82 applied, the court had to examine the impugned activity and grant judgment if infringement were established.
4. Discrimination and territorial scope. The evidence, including photographs of competitors’ clothing, gave Adidas a real prospect of proving that other manufacturers’ identifications were not subjected to the same restrictions. The court did not finally determine that factual issue. The decisions also had a sufficient connection with the Community because they affected Wimbledon and could substantially affect trade between Member States. Media coverage of the US Open could have a substantial effect on the English market, supporting jurisdiction to grant relief against the United States Tennis Association.
5. Interlocutory injunctions. Damages would not adequately compensate Adidas for the uncertain effect of tournament exposure on sales, nor would damages adequately compensate the relevant defendants or rival manufacturers if relief were wrongly granted. The relevant status quo was the position before the dispute arose, and the delay was not unreasonable in view of the parties’ settlement discussions. There was a serious issue to be tried and substantial evidence supporting Adidas’s case. Injunctions were therefore granted against the first, second and fifth defendants and against ITF in relation to tournaments held in the European Community, subject to cross-undertakings in damages and liberty to apply.
6. An expedited trial was directed to commence on or about 9 October 2006.

First-instance decision. No prior appellate decision is stated in the judgment.