New Balance v Liverpool FC
At the end of October 2019, the Commercial Court handed down its decision in the New Balance v Liverpool FC case.
In brief, Liverpool entered into a sponsorship deal with New Balance in 2011 which gave New Balance the option of matching any third party offers at the end of the agreement, provided they did so on terms which were no less favourable to Liverpool than those in the existing deal, and, importantly, matched “the material, measurable and matchable terms of any third-party offer.”
If New Balance matched the offer, then Liverpool would have to enter into a new agreement with them on those ‘matched’ terms.
With the current agreement ending at the end of the 2019-20 season, and having failed to agree a new deal with New Balance, it was agreed that Liverpool could approach other potential sponsors.
Nike was quick off the mark and a deal at £30m a year was agreed and notified to New Balance in July 2019 who, after some consideration, confirmed that it would match the deal.
Liverpool argued that it was not a genuine match in terms of the ability of New Balance to fulfil the distribution obligations (retailing of LFC licensed products) nor the marketing obligations for LFC products.
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New Balance disagreed and went to court to enforce its rights under the original contract.
Although the court accepted that New Balance could fulfil the distribution obligations, it decided that Nike’s powerful marketing reach via its top stars, such as Lebron James, Serena Williams and Drake, could be measured and by not making reference to this calibre of superstar in its offer, New Balance did not satisfy the conditions of its matching rights.
The decision has a wide-ranging impact on the drafting of ‘matching rights’ in sports sponsorship agreements and will be relevant to brands, clubs and professional athletes involved in sponsorship and endorsement deals.
For sponsors, the lesson to be learnt is that you must have your agreements clearly drafted and above all be specific about what is to be matched.
Liverpool’s current domination of the Premier League, coupled with winning this case, makes Nike’s deal look even better!