Key Legal Issues in the Sponsorship of Sports Teams and Events
Sports & Events Management Focus
Sponsorship of sports teams and events is a dynamic area where legal, contractual, regulatory, and ethical issues intersect.
Law Update: Issue 371 - All Access Pass to Sports and Events Law
David YatesPartner,Head of Digital & Data
Shaima BerriTrainee Solicitor,Digital & Data
Sports sponsorship is a vital component of the global sports industry, providing billions of dollars in revenue for teams, athletes, and event organizers. Companies, in turn, benefit from increased brand exposure and association with positive sporting values. However, the sponsorship landscape has become increasingly complex due to evolving legal, ethical, and regulatory issues.
At the core of any sports sponsorship deal is the association between the sponsor's brand and the sports team or event. Companies invest significant amounts to ensure their logos, trademarks, and advertising materials are displayed prominently at sports events and in media coverage. However, safeguarding these intellectual property rights presents various challenges.
One of the primary concerns for sponsors is protecting their trademarks from unauthorized use. For example, ambush marketing—a strategy in which a brand attempts to link itself to an event without being an official sponsor—can dilute the value of official sponsorships. Ambush marketing remains a key issue for sponsors of prominent sporting events such as the Olympics and the FIFA World Cup, where non-sponsors attempt to exploit the event’s global reach without paying for official sponsorship rights.
Companies engaging in ambush marketing can be careful not to use registered trademarks, using other colors and images to indirectly associate themselves with an event. Then the question becomes whether this will mislead consumers, who are attracted to the company’s goods and services because they mistakenly believe the company is associated with the event. Enforcement can be challenging. For sponsors, ensuring that their intellectual property is protected involves not only legal safeguards but also close cooperation with event organizers to monitor and prevent such activities.
The increasing consumption of sports via digital platforms presents additional challenges. Sponsorship deals now include digital rights for online broadcasts and social media promotion. However, these rights need to be clearly defined in contracts to avoid disputes, particularly in cases where sponsors seek exclusivity over specific digital advertising spaces.
For instance, if a sponsor secures digital advertising rights but a team promotes other brands on social media or streaming services in a manner that could lead to confusion or brand dilution, it could result in an IP dispute. Legal professionals need to ensure that sponsorship contracts account for the complexities of digital media rights and offer protections that reflect the current landscape of online sports consumption.
The proliferation of publicly available platforms on which users can post user generated content, such as event highlights or even copies of extracts from broadcasts, can also adversely affect the value of digital media rights. It was noteworthy that during the Olympics in Paris in 2024 there was virtually no user generated content in relation to the event accessible on YouTube, suggesting that the organizing committee was very proactive in enforcement and prevention.
Sports sponsorship deals are typically governed by comprehensive contracts that detail the rights, obligations, and remedies available to both parties. However, the nature of these agreements means that disputes can arise, especially when unforeseen circumstances affect the performance of either party.
The COVID-19 pandemic caused major upheaval to the sports world, with many events canceled or postponed. This highlighted the importance of force majeure clauses in sponsorship contracts, which excuse a party from performing its contractual obligations due to extraordinary events beyond its control. Sponsors, teams, and event organizers found themselves in legal disputes over whether the pandemic constituted a force majeure event and whether sponsors were still obligated to make payments for events that did not take place.
In response, many sponsorship agreements now include explicit pandemic-related force majeure clauses. These clauses must be drafted carefully to specify what constitutes a triggering event and how the parties should handle cancellations or postponements, including the possibility of refunds or contract extensions.
Sports event managers are aware that matches can be cancelled or postponed, or venues changed, and they like to have in sponsorship contracts this flexibility without the sponsor having recourse or a reduced fee. This is not always agreeable to sponsors, particularly in multi-year contracts.
Morality clauses are increasingly common in sports sponsorship agreements. These clauses allow sponsors to terminate or renegotiate agreements if the team, athlete, or event becomes involved in a scandal or controversy that could harm the sponsor’s brand. Recent high-profile cases involving athletes or teams caught in legal or moral scandals have demonstrated the importance of including these provisions.
However, morality clauses can also be contentious in court. Their enforceability could depend on how broadly or narrowly the clause is drafted and whether the alleged moral breach is clearly defined. Vague terms like “bringing disrepute” can lead to disputes over interpretation, making careful drafting essential. And as we know, “what is moral” can vary widely between nationalities, cultures and religions.
Legal professionals working in sports sponsorship must navigate an increasingly complex regulatory environment. Different jurisdictions have varying rules about what types of companies can sponsor sports events, how sponsorship materials can be displayed, and the specific legal obligations of both sponsors and teams.
Sponsorship by gambling and alcohol companies has become a significant regulatory issue, especially in sports leagues that attract large and diverse audiences, including minors. Further, in the Middle East most countries prohibit the advertisement of gambling and alcohol. This can give rise to complicated issues for sponsors in these industries, who may have sponsored a motor racing team for instance, when the motor racing team competes in the Abu Dhabi Grand Prix. Generally speaking, the team’s display of the brands of gambling or alcohol company sponsors will be advertising.
Another regulatory area that impacts sponsorship is anti-doping compliance. Sponsors want to ensure that their brand is associated with clean sports, and any connection to doping scandals can severely damage their reputation. Contracts now often include provisions allowing sponsors to terminate agreements if a team or athlete is found guilty of doping violations.
Beyond the legal and regulatory issues, sports sponsorship increasingly intersects with ethical and social concerns. Sponsors and teams are under pressure to align with societal values and ensure that their relationships do not generate negative public perception.
Sponsors may have concerns about a public backlash for their association with an event taking place in a country with a poor human rights record. Similarly, concerns about environmental sustainability have prompted sponsors to reconsider partnerships with sports teams or events that do not meet Environmental, Social, and Governance criteria.
Sponsorship deals are now often evaluated through an ethical lens, with companies carefully considering how their association with sports organizations reflects their corporate values. Legal professionals must help navigate these discussions and draft agreements that account for potential public relations risks.
Sponsorship of sports teams and events is a dynamic area where legal, contractual, regulatory, and ethical issues intersect. Legal advice and representation will often make the difference between a successful sponsorship program and a program which delivers little in the way of benefits for the sponsor.
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For further information,please contact David Yates and Shaima Berri.
Published in October 2024
