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Saturday, April 14, 2007

Legality of BCCI restrictions on endorsements a grey area

Restrictive covenants are not new in most contracts. Only the scope of restriction that the BCCI (Board of Control for Cricket in India) seeks to impose has stunned the ad industry.

“Thus far, the restrictive covenants imposed by the BCCI in the player-retainer agreements have focused on compliance with team sponsorship obligations (to wear team outfits, travel on the official airline while on tour, stay in the team hotel, etc) and on the restraints on ambush marketing around major tournaments (so that the official event sponsors’ interests are not devalued through individual players promoting competing brands),” explains Mr Nandan Kamath, Director, GoSports (

“To my mind, the legality of the proposed BCCI restrictions on cricketer endorsements remains in a grey area. I know of no other comparable initiative anywhere in the world and I can see compelling legal arguments on both sides. Regardless, I believe that a carte blanche restriction on the number or quantum of endorsements is misguided,” he says.

Mr Kamath is no stranger to cricket and law. He was an avid cricketer at the junior level, representing the India U-16’s and captaining the Karnataka state team. Also, he is a graduate of Harvard Law School, the University of Oxford (on a Rhodes Scholarship) and the National Law School of India. His firm works with ‘the country’s most talented sportspersons on translating their potential into performance,’ as the site informs.

Here is his take on a few questions

On restrictive covenants

The most basic restrictive covenant imposed by the advertiser has been the non-compete: that the athlete will not endorse or use the products of a competing brand unless the law or special circumstances dictate (such as the competitor being an umbrella team sponsor). Another hotly negotiated clause is the right of first refusal: for a period of 3-6 months after expiry of the contract term, the brand has a right to match any offer from a competitor and the athlete would be obliged to accept.

On endorsements around the world, and on whether rates commanded by our cricketers compare well with global trends.

The best tennis players like Federer, Nadal and Sharapova, top-notch golfers such as Tiger Woods, and football stars like Beckham make a tremendous amount from their endorsements. But they each have global stages and more evolved markets and platforms on which to display their wares.

Internationally, whole products have been developed around current and retired sportspersons. I think one of the best examples is the George Foreman Grill, a highly intuitive brand association between a former heavyweight boxer and a meat-grilling implement.

Today, only a Tendulkar or a Dravid can command internationally competitive rates; the other cricketers earn a fraction of the amount and most athletes from non-cricket sports consider themselves fortunate if they receive free equipment and monies sufficient to sustain their careers without personal expenditure.

On how things are in other sports, in India

Most non-cricket athletes, even the best in the country, have it really tough on the commercial front. It is common knowledge that many of them live from week to week and tournament to tournament supporting themselves with earnings from prize money. Over their careers, most will spend more than they will earn on following their passion. Frankly, there aren’t yet enough well-developed platforms for these sportspersons and careers in these sports remain unstructured and high-risk. With opportunity costs being high, the commercial proposition unclear and the university sports system in shambles, teenage dropout presents one of the most significant challenges in Indian sport.

On lessons for business

My belief is that brands will soon see the obvious opportunity to build early associations with talented young athletes and to grow with them and their careers. With non-cricket sports just waiting to explode in India, a very strong case can be made for spending a tiny fraction of the cricketer endorsement costs on athletes such as a high-performing teenage swimmer, a pre-teenage chess grandmaster and other precociously talented youngsters. They signify India’s youthful exuberance in the truest sense. Speaking of return on investment, the fore-thinking brand in particular and Indian sports in general could end up the big winners.

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