What are Matching Rights?
This is not the first matching rights dispute before the English Courts in recent years. Followers of William Fry’s Sports Law updates will recall our article on last year’s clash between Glasgow Rangers and Sports Direct which is available here. Matching rights (also known as rights of first refusal) provide an incumbent supplier with the right to match any offer that their customer receives from a competitor upon the expiry of the incumbent’s contract.
Case Facts
In 2011 Liverpool Football Club (Liverpool) entered into a sponsorship agreement with New Balance which permitted New Balance to design, manufacture and distribute Liverpool replica shirts until 2020. The agreement included a matching rights clause granting New Balance the right to match the “material, measurable and matchable terms” of any third-party offer to manufacture and sell Liverpool shirts beyond that date.
In July 2019, approaching the expiry of its sponsorship agreement with New Balance, Liverpool entered negotiations with Nike and sent a copy of Nike’s terms to New Balance. The Nike terms included two key commitments regarding distribution and marketing which were central to the dispute before the Court. Nike committed to:
- sell the licensed products in 6000 stores worldwide (including 500 stores owned or controlled by Nike); and
- promote the licensed products using “marketing initiatives featuring not less than three (3) non-football global superstar athletes and influencers of the calibre of Lebron James, Serena Williams, Drake, etc”.
On receipt of Nike’s offer, New Balance made a counter-offer to Liverpool committing to distribute the licensed products in the same number of stores and market the licensed products using “global superstar athletes and influencers”. Crucially, New Balance did not reference who such global superstars might be or provide any examples of the calibre of athletes and influencers which New Balance intended to use to promote the licenced products.
Key Findings of the Court – Who is a Global Superstar?
The case turned on whether Nike’s marketing commitment was “measurable” and whether New Balance had in fact matched it. The Court was satisfied that Nike’s marketing terms were measurable and that New Balance failed to match them. The Court held that the star power of named stars is measurable in a variety of ways, including social media exposure.
Although New Balance offered to use athletes and influencers who were global superstars, it failed to name any such stars and so had not managed to offer stars of the calibre of Lebron James, Serena Williams or Drake. The Court decided that for this reason, the New Balance offer was less favourable than Nike’s. As such, Liverpool was free to enter into a new agreement with Nike and to decline the deal offered by New Balance.
Lessons for Brand Partnerships
This decision has some important lessons for brand partnerships. The Court was satisfied that relative “star power” is something that is capable of measurement. This case also highlights once again the difficulty for the holder of matching rights in circumstances where aspects of a competing offer are not capable of being matched by the incumbent. Conversely, this decision provides a possible roadmap for challenger brands in relation to how they might best structure their competing offers if they wish to overcome an incumbent’s matching rights. The more unique they can make their offer, the better.
Contributed by: Kate Corcoran
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