The Federal Court of Australia has today (Monday) opened a civil trial against former Tennis Australia directors Harold Mitchell and Steve Healy, with the court hearing that the former impeded rival bids for the domestic rights to the Australian Open in an effort to force through a deal with commercial free-to-air broadcaster Seven.
The trial brought by the Australian Securities and Investments Commission (ASIC) began in Melbourne today, a year on from the regulator issuing civil penalty proceedings against the duo in relation to their role in the 2013 decision that led the governing body to extend its rights deal with Seven without launching a tender process.
The Tennis Australia board made the controversial decision to extend its contract with long-time partner Seven for the Australian Open grand slam and other tournaments for a five-year period spanning 2015 to 2019.
Seven was awarded the rights in 2013 in a deal reported to be worth a total of AUD$195m [€118.8m/$132.6m].
That move has since come under scrutiny and ASIC has alleged that both Mitchell and Healy withheld material information from the Tennis Australia board when it made its decision to award the rights.
The duo are also said to have failed to ensure that the board was fully informed about the value of the rights, the interest of parties other than Seven in acquiring those rights and the best method of marketing them.
Mitchell and Healy are alleged to have failed to advise the board that Tennis Australia was likely to obtain better terms by putting the rights out to competitive tender, as well as failing to ensure that a sub-committee, that had been appointed by the board to advise it about the granting of the rights, carried out its functions.
Public-service broadcaster ABC reported that the court today heard Seven’s fellow commercial broadcasters Ten and Nine, along with the IMG agency, had expressed interest in securing the rights to the Australian Open for the 2014 to 2018 period.
Ten was initially said to have been offering “in excess of AUD$40m a year” for the rights, before increasing this bid to AUD$50m per year. IMG, which already held overseas rights to the tournament, was said to have been prepared to pay AUD$210m for a seven-year deal for domestic rights.
An external report had been prepared which valued the broadcast rights at AUD$148m to AUD$212m, but court documents allege this was not presented to Tennis Australia board members at the request of Mitchell. He is also said to have failed to have presented an internal Tennis Australia report noting that Seven’s rights in 2007 “were significantly undervalued”.
The court heard that Mitchell strongly supported the Seven extension deal to the board and had revealed competing offers to Seven executives, as well as sharing the internal and external valuation reports.
During the May 2013 Tennis Australia board meeting at which the rights were assigned, the court today heard that directors were not informed about the rival offers or presented with the research concerning the value of the rights.
Healy served as president of Tennis Australia from October 2010 to April 2017, when he also resigned as a director of the organisation. Mitchell retired from the Tennis Australia board in October 2018. He served as the body’s vice-president from December 2015 until his retirement. Both men have strongly denied any wrongdoing.
In June 2018, Nine reached an agreement to commence its coverage of the Australian Open a year early, with the deal coming a week after it said it had exited talks with the rights-holder, Seven. Nine’s deal with Seven and Tennis Australia meant its contract started in January 2019 and runs for six years, until the end of 2024.
Nine initially took the domestic rights to the Australian Open from Seven in a five-year deal signed in March 2018.