German football's 50+1 rule 'unproblematic' says regulator

German football's unique "50+1" club ownership rule received legal backing on Monday when the country's independent competition regulator, the Bundeskartellamt (BKartA), published a preliminary assessment concluding that the rule does not necessarily infringe free market competition laws.

"In the authority's view, the basic rule is potentially unproblematic under competition law because of the sport policy objectives it pursues," read a statement from the Bundeskartellamt in Bonn.

"Although the rule constitutes a restriction of competition as it sets certain conditions for participation in the Bundesliga, the DFL [German Football League] is nevertheless pursuing legitimate objectives, i.e. to ensure the organization of competition between membership clubs and an even balance in sports competition."

Furthermore, the BKartA also emphasized the ethical and social objectives of the 50+1 rule in protecting the participatory and member-led nature of German football clubs, saying:

"The DFL's argument that it wishes to maintain the club character of the sport can be considered such an objective: It offers the public at large the possibility to co-determine a club's affairs by becoming a member and hence to participate in Bundesliga activity beyond their role as consumers."

50+1 'benefactor exemptions'

Introduced in 1999 and enshrined in the statutes of the German Football League (DFL), the 50+1 rule stipulates that, should a football club outsource its professional football operation into a separate limited company, as most German clubs have done, the parent club must retain 50% of the voting shares in that company, plus one share.

The rule therefore prevents German clubs from being majority owned by external entities in the way that, for example, English clubs are, and was one of the reasons why Bundesliga sides Bayern Munich and Borussia Dortmund did not sign up the European Super League in April.

However, the rule does allow for exemptions in cases where an investor has "substantially supported the parent club's football activities for a continuous period of more than 20 years." Such exemptions have been granted to VfL Wolfsburg (Volkswagen), Bayer Leverkusen (pharmaceutical giants Bayer) and TSG 1899 Hoffenheim (SAP co-founder Dietmar Hopp). Red Bull-backed RB Leipzig adhere to the 50+1 rule on paper only.

In a surprising move, however, these "benefactor exemptions" have now also been criticized as "problematic" by the Bundeskartellamt, which says they undermine the rule's "uniform application and enforcement" and also result in a "competitive disadvantage" for those clubs which are not exempt.

"If the benefactor exemption in its current version is included in the consideration, the restriction of competition appears disproportionate," read the statement. "This raises doubts whether the overall combination of the basic rule and exemption is suitable to achieve the objectives of the 50+1 rule.

"This would risk the loss of key characteristics such as membership participation in the clubs and transparency for members … and also results in a competitive disadvantage for those clubs which do not benefit from the exemption.

"Membership-owned and investor-financed clubs compete alongside one another. If some clubs have better possibilities to secure equity funding than others, this is more likely to distort rather than create an even balance in sports competition."

Why now? And what next?

The Bundeskartellamt carried out its assessment at the behest of the German Football League (DFL), which wanted to check the legal standing of the 50+1 rule in the wake of recent attempts to have it scrapped.

Two of the rule's biggest critics, Martin Kind of Bundesliga 2 side Hannover and Hasan Ismaik of third-division side 1860 Munich, have both had applications for exemptions rejected in recent years, and have repeatedly threatened to take their cases to the European Court of Justice in the belief that the 50+1 rule contravenes competition law.

In March 2018, the 36 Bundesliga and Bundesliga second division clubs which make up the DFL voted to retain the rule following pressure from supporter groups, who have now been buoyed by the preliminary assessment of the Bundeskartellamt, which now awaits the DFL's reactions to its findings.

If the DFL is committed to retaining the 50+1 rule and the member-led nature of professional football in Germany, it may consider strengthening the requirements for future exemptions — although a reversal of currently existing exemptions is highly unlikely.

If, on the other hand, the DFL is interested in opening up German football to greater investment, it may read the Bundeskartellamt's assessment of the exemptions as "problematic" as encouragement to abolish the rule altogether.