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CAF: Lagardère deal termination ‘legal consequence’ of regulators’ recommendations

The Confederation of African Football (CAF) today strongly defended its move to terminate Lagardère Sports’ 12-year global media and sponsorship rights contract, describing it as a “legal consequence” of recommendations by two different competition authorities.

Lagardère released a statement on Tuesday evening criticising CAF’s “unilateral decision” to cancel the contract in an action the France-based conglomerate described as “unlawful, unreasonable and unjustified”.

The deal, which was worth $1bn from 2017 to 2028, has long been a controversial one and has been the subject of investigations by the Egyptian Competition Authority (ECA) and the Competition Commission of the Common Market for Eastern and Southern Africa (CCC).
CAF today shone a light on the recommendations of those two bodies as the reason for the termination.

CAF stated: “In 2017, the Egyptian Competition Authority found that the agreement breached Egyptian competition rules because Lagardère was appointed as CAF’s exclusive agent for the marketing and media rights for an uninterrupted 20-year period without any open tender.

“By the same decision, ECA declared the agreement null and void and imposed a number of remedies on CAF. Those remedies included the obligation to immediately terminate the agreement and suspend its effects within the Egyptian market.

“The Economic Courts of Cairo then issued two judgments in 2018-2019 whereby they found the two former CAF officials, the former president, Issa Hayatou, and the former secretary general, Hicham El Amrani, who signed the agreement guilty of anti-competitive and fraudulent conduct, and imposed a fine of LE500m [€27.9m/$31m] on each of them.

On appeal, the fine was reduced to LE200m and CAF was held to be jointly liable for the payment of that fine.”

CAF added that CCC ruled “that the agreement infringed” its competition regulations and “recommended the imposition of a financial penalty on CAF and the adoption of certain remedies, including the termination of the agreement”.

Properties covered by the contract include CAF’s flagship Africa Cup of Nations, the Africans Nations Championship and the CAF Champions League.

In its statement today (Friday), CAF insists that it “had no choice but to terminate the agreement” given the respective stances taken by the competition bodies.

The Egypt-based football confederation added: “CAF has repeatedly made it clear to Lagardère, including at a meeting this week, that its termination of the agreement was not an ‘unilateral decision’ as was wrongly presented in Lagardère’s recent press release.

Termination of the agreement is the legal consequence of the decision of ECA, the judgments of Egyptian courts and the recommendations and imminent decision of the CCC.”

An invitation from CAF to “discuss appropriate next steps and co-operation to ensure the fulfillment of the obligations toward sponsors, licensees and football fans with respect the current competitions” has not been taken up by Lagardère, according to the confederation.

The agency deal has been the subject of much scrutiny since Ahmad Ahmad deposed Issa Hayatou as CAF president in March 2017. CAF and Lagardère announced the “landmark” agreement (an extension of a previous deal running from 2009 to 2016) in the middle of 2015. At the time, Hayatou said that CAF had “appreciated and is very satisfied” with the agency’s performance.

Arnaud Lagardère, the group’s general and managing partner, yesterday came out strongly in defence of Lagardère’s actions.

He said: “We have here a very very strong case and we’ll do whatever it takes either to maintain the contract or deal with more changes or get a significant amount of cash…

“…we are a respected company, we’ve served the CAF during all these years with efficiency, loyalty and dedication. So this is really unfair and even if I know that no one should be too candid or naïve in this business, I think we don’t deserve such a treatment.

“We will make our voice sound loud and clear to protect the interest of our company’s shareholders. Whatever it takes. We hope that we won’t need to do it but if needed, we’ll do it.”

Commenting as the group presented its third-quarter revenues, he said that news of CAF’s move to terminate the deal had led to the loss of between €160m ($173.4m) and €170m in value from Lagardère’s group’s market capitalisation, the total value of the company’s shares of stock. Lagardère continues to hold negotiations over the sale of its sports and entertainment division.

He also revealed that the average recurring Ebit (earnings before interest and taxes) from the CAF contract would be forecast at around €10m per year for the 2020 to 2028 period.

Competition probes

The deal, which was struck without the rights being made available in a formal tender, became the subject of the CCC’s antitrust investigation that has been running since February 2017.

The CCC has said it has concerns about the impact on market competition of the lengthy duration of the deal, and those agreed under it with broadcasters and sponsors, and rights of first refusal included in the deals. The investigation continues, and in August the CCC requested the attendance of the CAF at an evidentiary hearing.

Earlier this year, the CAF renegotiated part of the deal to take back control of certain free-to-air media rights in sub-Saharan Africa.

A probe by the Malawi-based CCC followed swiftly on from an investigation by the ECA, which claimed that the Lagardère Sports agreement was signed without offering opportunities to other agencies “in a natural framework that ensures the existence of free and fair competition”.

The ECA’s action was also set against the backdrop of the diplomatic crisis in the Middle East and North Africa and the battle for broadcast rights in the region with attempts to take on the Qatar-based beIN Media Group, the erstwhile dominant player.

Ahmad was quick to criticise the Lagardère deal after taking office at the Cairo-based confederation. Shortly after his election, he said that he would investigate the agreement and flagged up his concerns about its length, specifying that he would “never sign anything for longer than three years”. He also described the contract as “not good for African football”.

CAF is thought to have first made moves to renegotiate the deal at the end of 2017. At the CAF general assembly in September 2018, Ahmad declared that CAF had agreed with Lagardère to review the terms of the contract and promised an update to member associations by the end of the year.