Adidas-Salomon AG v Draper & others
Reference:  EWHC 1318 (Ch);  ISLR, SLR-76
Court: Chancery Divison
Judge: The Chancellor
Date of judgment: 7 Jun 2006
Summary: Sport - Tennis - Competition Law - Arts 81, 82 Treaty of Rome - Players' Dress Regulations - Manufacturer's Logo - Injunction Application - Defendants' Summary Judgment Application
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Instructing Solicitors: Addleshaw Goddard for the Claimants; Cleary Gottleib, Onside Law, Skadden Arps Slate Meagher & Flom and Hammonds for the Defendants
The Defendants were the organisers of the 4 Grand Slam tennis tournaments & the International Tennis Federation – together they comprised the Grand Slam Committee (GSC). The GSC Code included rules governing players’ dress prohibiting manufacturer’s identification on clothing excepting manufacturer’s standard logos not exceeding at most 4 square inches. Distinctive designs, that were not manufacturer’s standard logos, were permitted. Adidas had been able to use its 3 -stripe design (which was not treated as a manufacturer’s standard logo) even though it was registered as a trade mark. In 2005, GSC informed Adidas that the 3-stripe motif would now be considered a manufacturer’s identification. Adidas claimed this decision was contrary to Art 81 (anti-competitive agreements) & Art 82 (abuse of dominant position) of the EC Treaty. Adidas applied for an interim injunction prohibiting implementation of the decision; Ds made a cross application to strike out/ for summary judgment.
(1) whether the Claimant had no real prospect of success because the dress code consisted of rules relating to the regulation of the sport with no reference to any economic activity and as such fell within the ‘sporting exemption’ to competition law.
(2) whether the GSC’s decision discriminated against Adidas because other manufacturers continued to be permitted to incorporate their own distinctive design elements which identified them as manufacturers on players’ clothing.
(3) whether an injunction prohibiting the defendants from implementing the decision should be granted.
Granting an injunction & making no order on the Ds’ applications (save for summarily dismissing one paragraph of the Particulars): (1) Adidas had a real prospect of establishing that the code was not within the sporting exception. The preservation of a tournament’s appeal by restricting on-court advertising was part of the economic activity of the promoter. (2) Whether other manufacturer’s identifications were worn by players in excess of the size limits was a question of fact which could not be determined at this stage, but photos of Diadora 2 stripes & Nike sunray were sufficient to establish a real prospect of proving that others had been allowed to use design elements amounting to manufacturers’ identifications. (3) Wimbledon & the US Open would take place before an expedited trial. Damages would not be an adequate remedy. Sales figures of clothing for different periods were an uncertain guide. Ds would also suffer uncompensatable loss but the status quo favoured the C.
A surprising decision given the long history of ECJ judgments to the effect that purely sporting rules are excluded from the application of competition law even if they have economic consequences provided they are limited to their proper object: see for example Meca-Medina v Commission Case T-313/02 (doping rules do not pursue an economic objective). A key benefit for Adidas is that it can use its clothing incorporating the 3-stripe design at both Wimbledon and the US Open. The injunction includes a cross-undertaking offered by Adidas over and above the normal undertaking: “to pay any damages which other manufacturers of tennis clothing who sponsor players at Grand Slam tournaments sustain” which the Court considers the Claimant should pay if the injunction is discharged at trial. Given that the judge considered that Adidas’s potential loss could not be adequately compensated in damages, this must be regarded as a high-risk undertaking on the part of Adidas.