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Rule yourself | The IOC’s athlete marketing restrictions risk death by a thousand cuts

At the 2016 Summer Olympics in Rio, the garland for the best piece of marketing arguably went to Under Armour for a short-form video featuring Michael Phelps. The 90-second spot – released on social media just seconds after the swimmer won his 20th gold medal at the Games – employed moody cinematography and an elegiac soundtrack to tell the story of the sacrifice behind the American’s record-breaking achievement. “It’s what you do in the dark that puts you in the light,” read the tagline, before Under Armour’s ‘Rule yourself’ slogan flashed up on screen.

The video was so successful in putting Under Armour at the heart of the Olympic conversation that the agency behind it, Droga5, went on to win a Cannes Lions award for the campaign. Reflecting on its success, the company’s co-head of strategy Harry Román-Torres said he liked to think that the stirring music and imagery from the video would have been playing in the back of people’s minds as Phelps stepped up onto the podium.

Unfortunately for the IOC, Under Armour achieved all of this without paying a penny towards the Games’ TOP marketing programme.

For a fraction of the hundreds of millions of dollars that it would have cost to sponsor the Olympics, the sports equipment company had taken advantage of a relaxation in the IOC’s Rule 40 marketing restrictions to give itself almost as much prominence as the IOC’s official roster of partners.

Rule 40

Rule 40 is the controversial clause written into the Olympic Charter to protect the exclusivity of those TOP partner rights. It once prevented non-sanctioned brands from associating with the Games at all and prohibited athletes from crediting non-Olympic sponsors during a blackout period that spanned the event. But as the latest edition of the Olympics in Pyeongchang approaches, there are plenty of experts who think the rule is in danger of being diluted to the point of irrelevance.

“My personal view is that it’s become so easy to ambush things without breaching anything,” says Tim Crow, a consultant who in his previous guise as CEO of the Synergy Sponsorship agency designed campaigns for clients that cleverly circumvented the IOC rules.

“I wouldn’t call it ambush marketing but I’ve worked on lots of campaigns where brands have had a good reason to want to use the Olympics as a marketing platform, but for whatever reason they couldn’t be a sponsor.”

Crow traces the erosion of Rule 40 to the dawn of social media and the London 2012 Olympics when athletes became increasingly vocal about having to break ties with their long-term partners during the Games. He says the IOC has subsequently been forced to try to strike a balance in recognising the important support that personal sponsors provide to athletes while protecting Olympic partner rights.

“To be fair to the IOC they have a lot of athletes on the commission now and the bottom line is it was not very attractive to sponsor an Olympic athlete because of the regulations, so they did need to relax them,” he says. “If nobody wants to become an Olympic athlete they’ve got no Olympics.”

The upshot was a loosening of restrictions at London, followed by a further relaxation of the rules in the build-up to Rio. At the latter Games, the IOC lifted the advertising blackout on non-Olympic partners meaning athletes could appear in advertising campaigns with long-term sponsors during the Games. This was subject to special dispensation from their National Olympic Committees and a series of convoluted restrictions that prohibited those sponsors from using Olympic-related words like ‘Rio’, ‘Gold’, ‘Olympian’ and ‘Medal’. Aside from leaving the IOC vulnerable to satire, the restrictions also provided the gap that Under Armour exploited so expertly with the Phelps campaign.

German challenge

The IOC might have hoped things would stop there. In March 2017, it elected to maintain the approach to Rule 40 employed at the Rio Games for the Pyeongchang Winter Olympics this year. But, an action against it from the German Federal Cartel office in October put paid to those ambitions.

Following up on a complaint by the Federal Association of the German Sports Goods Industry, the cartel office argued that even the Rule 40 approach employed in 2016 represented a monopolisation of marketing rights that was harmful to the earning abilities of athletes.

In December it claimed a win against the IOC and German Olympic Sports Confederation (DOSB) when both parties offered to loosen the previous restrictions on advertising activities by athletes exclusively targeted at Germany by means of a series of commitments:

  • Athletes will be able to share or retweet content from the IOC, local organising committee, DOSB or Team Germany and also link it with greetings or acknowledgments to sponsors
  • The rules for the approval of applications will be amended, with the deadline significantly reduced and not constituting a cut-off period
  • Generic advertising, as well as greetings or congratulatory messages from the sponsors to athletes will also be permitted during the “frozen period” under certain conditions.

Although the case does not represent a legal precedent, Matthew Pryke, a partner with specialist sports legal firm Hamlins LLP, argues that it does represents a threat to the ability of the Olympic movement to generate money.

“This has come about as a result of, in effect, a negotiated position between them,” he says. “It’s not an actual ruling that has set a precedent, but what I think it does show is a general trend, towards a dilution or narrowing of these exclusive arrangements that sport has traditionally relied upon.”

More alarmingly for the IOC, he describes the negotiated position as a ‘moveable feast’ that could still be subject to change. Because competition law elsewhere in the EU is the same, he adds that there is no reason why a British or French competition authority, for example, couldn’t choose to take exactly the same position within their jurisdictions.

“As I understand it, these rules are going to apply for the winter Olympics that are forthcoming,” he says. “The IOC have proposed this position and they [the German Cartel Office] are currently carrying out market tests to see whether the position the IOC has proposed is considered within Germany to go far enough.”

Patrick Nally, the man who advised the IOC to centralise its sponsorship rights and who was instrumental in the creation of the TOP sponsorship programme at the start of the 1980’s, says the negotiated position reminds him of the “messy” days before the rights were packaged together.  Although he understands why athletes want a bigger share of Olympic revenues, he says they already benefit from the money that trickles down from the TOP programme to fund their federations and sports – not to mention the money that contributes towards the staging of the games from which they gain recognition.

“It won’t achieve anything because it will be cutting everyone’s nose off to spite their face,” he says.

“You can’t expect companies to continue to feed substantial sums of money to support the Olympics if the competitors can be very clever and sign up 20 to 30 well-selected athletes who would give a good level of exposure. Giving rights back to athletes, getting other sponsors that are competing with official sponsors, really is going to send it backwards again and rather than creating more revenue it will create less revenue.”

Nally suspects that the current IOC leadership has been protected from the worst impact of the erosion of Rule 40 by the lucrative sponsorship deals it has recently signed with Asian firms as the next three editions of the Games swing through the region. Beyond that, he thinks the IOC will have to think about directing a greater share of revenues to athletes to better dispose them to the TOP programme.

But, given the difficult circumstances, Pryke thinks the IOC has been adept in its handling of the dispute with the German cartel office so far.

“If I was in their position, the last thing I would want this to do is go to a formal hearing because the risk for them is so massive in terms of both the sanctions which you have under breaches of competition law and monopolistic positions,” he says. “The worst sanction would be that the regulation is void – then in effect it becomes open season for people. So actually, this sort of negotiated position and trying to get ahead of this is absolutely the right way to go about it.”