Business Law Prof Blog

FIFA, ESG, and BS

I'm a huge football fan. I mean real football-- what people in the US call soccer. I went to Brazil for the World Cup in 2014 twice and have watched as many matches on TV as I could during the last tournament and this one. In some countries, over half of the residents watch the matches when their team plays even though most matches happen during work hours or the middle of the night in some countries. NBC estimates that 5 billion people across the world will watch this World Cup with an average of 227 million people a day. For perspective, roughly 208 million people, 2/3 of the population, watched Superbowl LVI in the US, which occurs on a Sunday.

Football is big business for FIFA and for many of its sponsors. Working with companies such as Adidas, Coca-Cola, Hyundai / KIA, Visa, McDonald's, and Budweiser has earned nonprofit FIFA a record 7.5 billion in revenue for this Cup. Fortunately for Budweiser, which paid 75 million to sponsor the World Cup, Qatar does not ban alcohol. But in a plot twist, the company had to deal with a last-minute stadium ban. FIFA was more effective in Brazil, which has banned beer in stadiums since 2003 to curb violence. The ban was temporarily lifted during the 2014 Cup. I imagine this made Budweiser very happy. I know the fans were. 

This big business is a big part of the reason that FIFA has been accused of rampant corruption in the award of the Cup to Russia and Qatar, two countries with terrible human rights records. The Justice Department investigated and awarded FIFA hundreds of millions as a victim of its past leadership's actions related to the 2018 and 2022 selections. Amnesty International has called these games the "World Cup of Shame" because of the use of forced labor, exorbitant recruitment fees, seizure of passports, racism, delayed payments of $220 per month, and deaths. Raising even more awareness, more than 40 million people have watched comedian John Oliver's 2014 , 2015, and 2022 takedowns of FIFA. 

The real victims of FIFA's corruption are the millions of migrant workers operating under Qatar's kafala system. I remember sitting at a meeting at the UN Forum on Business and Human Rights in Geneva when an NGO accused the Qatar government of using slaves to build World Cup Stadiums. I also remember both FIFA and the International Olympic Committee pledging to consider human rights when selecting sites in the future. Indeed, FIFA claims that human rights were a "key factor" when choosing the Americas to host the 2026 Cup. 

With all of the talk about ESG including human rights and anti-discrimination from FIFA, Coca Cola, Budweiser and others related to the World Cup, how do those pronouncements square with FIFA's ban on team captains wearing the One Love Rainbow Arm Band?  Qatar has banned same sex relations  so seven EU team captains had planned to wear the arm bands as a gesture to "send a message against discrimination of any kind as the eyes of the world fall on the global game."  This was on brand with FIFA 's own  strong and repeated statements against racism after several African players suffered from taunts and chants from fans in stadiums. FIFA reiterated its stance after the death of George Floyd. Just today, FIFA issued another statement against discrimination, noting that over 55% of players received some kind of discriminatory online abuse during the Euro 2020 Final and AFCON 2022 Final.

It's curious then that despite FIFA's and the EU team's pledges about anti-discrimination, just three hours before a match, the teams confirmed that they would not wear the arm bands after all.  Apparently, they learned that players could face yellow card sanctions if they wore them. Qatar also bans advocacy and protests about same sex relationships. Unlike the stadium beer ban, this wasn't new.

And the human rights abuse allegations against FIFA aren't new. I've blogged about FIFA and the issues I encountered when meeting human rights activists in Brazil several times including here. So I will end with the questions I asked years ago about FIFA and its sponsors and add the answers as I know them today. 

1)   Is FIFA, the nonprofit corporation, really acting as a quasi-government and if so, what are its responsibilities to protect and respect local communities under UN Guiding Principles on Business and Human Rights? Answer: FIFA has pledged to comport with the UN Guiding Principles on Business and Human Rights, but its arm band ban shows otherwise. 

2)   Does FIFA have more power than the host country and will it use that power when it requires voters to consider a bidding country’s human rights record in the future? Answer: See the answer to #3. Also, it will be interesting to see what FIFA demands of 2026 host Florida, a state which is divesting of funds with a focus on ESG and which has proposed anti-ESG legislation.  

3)   If Qatar remains the site of the 2022 Cup after the various bribery and human rights abuse investigations, will FIFA force that country to make concessions about alcohol and gender roles to appease corporate sponsors? Answer: Nope

4)   Will/should corporate sponsors feel comfortable supporting the Cup in Russia in 2018 and Qatar in 2022 given those countries’ records and the sponsors’ own CSR priorities? Answer: Yep, despite public statements to the contrary. It's just too lucrative. 

5)   Does FIFA’s antidiscrimination campaign extend beyond racism to human rights or are its own actions antithetical to these rights? Answer: Yes the campaign does but again, the arm band ban shows otherwise. 

6)   Are the sponsors commenting publicly on the protests and human right violations? Should they and what could they say that has an impact? Should they have asked for or conducted a social impact analysis or is their involvement as sponsors too attenuated for that? Answer: Amnesty International is seeking corporate support for compensation reform, but hasn't been very successful.

7)   Should socially responsible investors ask questions about whether companies could have done more for local communities by donating to relevant causes as part of their CSR programs? Answer: In my view, yes. The UN has guidance on this as well. 

8)   Are corporations acting as "bystanders", a term coined by Professor Jena Martin?  Answer: Yes. 

9)   Is the International Olympic Committee, a nonprofit, nongovernmental organization, taking notes? Answer: Yes. Despite or perhaps because of the outrage over selecting China for the Olympics, the IOC has recently approved a Strategic Framework on Human Rights.

10)  Do consumers, the targets of creative corporate commercials and  viral YouTube videos, care about any of this? Answer: It depends on the demographics, but I would say no. How do I know this? Because I teach and write about business and human rights and I have still scheduled my grading of exams and meetings around the World Cup. Advertisers can't miss out on having 25% of the world's eyeballs on their products.  And FIFA knows that the human rights noise will all go away for most fans as soon as the referee blows the whistle to start the match.

In any event, my business and human rights students will enjoy grappling with the ugly side of the beautiful game next semester as we work on proposals for the city of Miami to live up to its 2021 commitments to human rights whether FIFA does or not.

Corporate Bystanders at the Rio Olympics

Greetings from SEALS in lovely Amelia Island. On Wednesday I presented on a proposed bilateral investment treaty between the US and Cuba, and tomorrow I am part of a discussion group on Sustainable Business. I will focus on the roles and responsibilities of corporate sponsors of the Rio Olympics. According to the official Olympics website, “[m]ore than just providing products and services for the event, [the sponsors] ensure that sport always comes first and that the whole world is inspired alongside us.”

Sponsors can spend up to $200 million for the privilege to inspire us. For many sponsors, the chance to have over a billion people watch their commercials and logos appear repeatedly over a period of a few weeks on television is worth the tens of millions of dollars. They often invest in slick YouTube campaigns that show their real or imagined connections to young athletes finally achieving their lifelong dream of bringing home the gold for their country. Apparently, 54% of consumers surveyed felt more positive about Nike after the company sponsored the Olympics based on how it chose to advertise. Many companies use these kinds of sponsorships as part of their corporate social responsibility initiatives. Dow is the official “carbon” partner of the games.

As anyone who watches the news knows, the $12 billion Rio Olympics has been fraught with controversy. According to reports, the crime rate is soaring and the bay is so filthy that the athletes have been warned to keep their mouths closed during water events. Brazil was one of the ten largest economies in the world when it was awarded the games years ago and now is in free fall. As part of the deal to get the games, Brazil promised the IOC and its citizens gleaming new transportation systems, hospitals, and infrastructure but one in seven of Rio’s citizens still live in one of the 1,000 favelas and those have not improved at all. A number of people have actually lost their homes to make way for Olympic venues. Rio’s street children have asked the head of the IOC for assurances that their human rights will be respected.

Human Rights Watch prepared a report last year that outlines some key concerns about the human rights abuses that typically occur at mega sporting events. Although the Olympic Charter states at p. 14 that “the practice of sport is a human right,” the HRW report identified violations that typically occur at these kinds of events. Many have already been documented in Rio including: forced evictions without due process or compensation due to massive new infrastructure construction; environmental activism; threats, intimidation, and arrests of journalists; silencing of civil society and rights activists, and discrimination.What does any of this have to do with business? I have some questions about the role of business that I will explore tomorrow and in my research.

West Virginia Professor Jena Martin has written about the concept of the “corporate bystander.” She notes that, “TNCs often get involved in relationships with state actors who violate international human rights. TNCs then argue that they cannot be held accountable for the violations because they merely observed the underlying atrocities and did not participate in the acts that caused them.” The large corporate sponsors who tout their corporate social responsibility initiatives and who vehemently oppose human rights shareholder proposals because they already have a program in place will likely distance themselves from what is going on in Brazil. They are just sponsors after all. But is that an appropriate response? Should the IOC do more to require human rights safeguards? Should corporate sponsors conduct impact assessments or is their involvement too attenuated? Do the consumers who felt better about Nike after watching the Olympics commercials care about the street children in Brazil or the women who are displaced from their homes? Would they think twice about buying sneakers if they read some of the links in this blog? Does any of this move the share price in either direction?  What is the actual business case for balancing the corporate sponsorship with the human rights impact?

The head of the IOC has signed on to work with the UN on the Sustainable Development Goals--seventeen economic, environmental, social, and governance initiatives that the private sector, government, and civil society aim to achieve by 2030. How does that square with conducting the Olympics in locales with human rights and environmental violations? Should the IOC only hold the Olympics in host countries with "perfect" human rights records and what would that even look like?

I will be discussing these issues tomorrow and will explore it more firsthand when I head to Rio on Saturday. In the meantime, corporate sponsors may hope that the press coverage on Friday evening focuses on panoramic shots of Sugarloaf and Copacabana Beach and not the planned protests before the opening ceremonies.

Sports Law Grading Break: A Little Perspective on Deflategate

I had planned to write a post about Delaware LLCs and who has standing to request judicial dissolution, but that post is going to wait.  I'm knee deep in Sports Law exam grading, and so sports is on my mind.  The big thing going on right now is, of course, Tom Brady's four-game suspension for his apparent participation in having footballs deflated to a psi that was not in compliance with league rules.  

The science on the benefits of deflating footballs is not clear, as noted here.  That, of course, is irrelevant to whether the rules were broken.  Some have argued that the air pressure rules are stupid, especially given that the league not long ago change the rules to allow each team to prepare their own footballs for use on offense. Andy Benoit of SI.com explains, 

With football being so much about strategy, the more comfortable the ball is for a quarterback and his receivers, the more entertaining the game becomes.

The NFL already agrees with this. Why do you think officials and ball boys go to such lengths to try to keep a football dry during a rainy game? Or, bringing it back to the inflate/deflate issue (or inflate/deflate controversy, since America has decided to be dramatic, if not hysterical, about this), why did the NFL permit quarterbacks to prepare their own balls before games in the first place?

The problem is, the league didn’t go far enough here. It should abolish all parameters regarding the ball’s air. Tom Brady didn’t cheat. Tom Brady’s job is to throw the football. Unfortunately, he had to go too far out of his way to do his job well.

I wouldn't think it would take a lawyer to explain that this reasoning is flawed, but perhaps it does. Even where a rule is stupid, counterproductive, or even obstructionist, it is still a rule. Failing to follow it leads to sanctions.  If a speed limit is too low, it can limit my ability to get to a meeting on time or make it so the FedEx driver can't deliver as many packages in a day.  But if either one of us gets clocked by a police officer's radar going 15 mph over the speed limit, we're going to get a ticket. And it's no defense to say, "But it's making it harder for me to do my job well!" 

Brady, through his agent, has vowed to appeal, as is his right.  Some people seem very concerned with Brady's image, and other have even suggested that the suspension could keep Brady from a future in politics.  Maybe, but given that we live in a country that has re-elected many people who have tarnished their own images while in office, I'm not going to be too concerned about this.  

The NFL, of course, has its own image issues, much of which is self-imposed.  The sanctions against Brady seem reasonable but severe, if acting in a vacuum.  But we don't, and it's hard to to look at other relative punishments for guidance.  The NFL has been aggressive with suspensions in other areas, such as Sean Payton's year-long suspension for BountyGate. Saints fans were certainly not happy with the outcome of the NFL's punishment.

On the other hand, as the Washington Post reported, A lot of people noticed that Tom Brady got twice as long a suspension as Ray Rice’s initial punishment.  The NFL could argue, of course, that Brady broke the league's rules, while Rice was subject to punishment from thecriminal justice system, too.  And they might, if they wanted to remain as tone deaf on domestic violence as they have been in the past.  

Why the NFL has this inflation rule, though, is a fair question. As Andy Benoit noted in the article linked above, why not just let each team provide footballs with whatever inflation they want?  If it is easier to catch a deflated ball, then it's also easier to intercept.  The league knows that offense sells tickets, so why not provide an advantage to all teams, if there is one to be had?  Seems like a win-win option, and it reduces the number of things NFL officials have to worry about enforcing. Less regulation of regulations that are hard to enforce and have dubious value to the integrity of game helps everyone involved, and it reduces people trying to game the system through largely irrelevant technical rule enforcement. (I'm looking at you, pine tar.)

Still, a rule is a rule, and if you get caught knowingly breaking a rule, there will (and should be) sanctions.  And let's be honest: The New England Patriots, with Bill Belichick and Tom Brady know what they are doing better than most.  They are arguably the most successful coach and quarterback combination in NFL history, and they are very, very good at what they do. They only do things they think will help them win, and if they do something risky, there's a good chance they're correct that there's an advantage to be had.  

Respect them for their skills, and hold them accountable for actions. And let's keep it all in perspective. It's still just football, and this time, no one got physically hurt.   

Should Law Professors Abstain From Online NCAA Tournament Pools?

This Sunday, the NCAA will announce the 68 basketball teams that are scheduled to participate in this year's men's basketball tournament.  Then, the true "madness" begins.  

At many schools, one or more professors will likely organize an NCAA Tournament pool.  The pool will likely include entry fees and prize money. The pool's rules and standings will often appear on a public website.

All of this may sound like innocuous fun -- especially during the anxiety-ridden days of waiting for ExpressO and Scholastica acceptances to arrive.  However, law professors playing in online, pay-to-enter NCAA Tournament pools technically are acting in violation of several federal laws -- albeit, laws that are rarely enforced,

One federal law that seems to prohibit online, pay-to-enter NCAA Tournament pools is the Interstate Wire Act of 1961.  This act disallows individuals from “engaging in the business of betting or wagering [through the knowing use of] a wire communication for the transmission in interstate or foreign commerce.”  According to various recent court decisions, the Wire Act applies to contests hosted via the Internet, as well as those hosted over the phone.  And even though the act was originally passed to crack down on organized crime, even "upstanding" individuals such as law professors, at least in theory, are not immune from prosecution.

A second federal law that seems to prohibit online, pay-to-enter NCAA Tournament pools is the Professional and Amateur Sports Protection Act ("PASPA").  Passed in 1992 at the behest of America’s five premier professional sports leagues (including the NCAA), PAPSA makes it illegal for any private person to operate a wagering scheme based on a competitive game in which “professional or amateur athletes participate."  Of course, PASPA includes a grandfather clause that exempts previously authorized government sponsored sports gambling in four states -- Nevada, Delaware, Oregon, and Montana.  But it doesn't include any exception whatsoever for private March Madness pools.

Finally, a third federal law that may disallow online, pay-to-enter NCAA Tournament pools is the Uniform Internet Gambling Enforcement Act.  This act, which was passed most recently in 2006, makes it illegal for those "engaged in the business of betting or wagering" to “knowingly accept” funds in connection with the participation of another person in unlawful Internet gambling.  Although the UIGEA offers a special carve-out provision for “fantasy sports,” this carve-out does not apply to March Madness pools because winning outcomes are based on the final score of actual game results, and not individual player performances. 

Of course, the likelihood of anyone going to jail for simply participating in an online NCAA Tournament pool may seem next to nil.  But if you are going to play in one of these contests, I have two simple recommendations: (1) let someone else other than you collect the money; and (2) encourage the host to 'grade' the brackets by hand, rather than posting contestant names and picks on an Internet website.

March Madness Is Coming -- And Legally Speaking, It Is Madness

Ten days from now will mark the start of the 2015 NCAA men's basketball tournament -- one of the most watched sporting events of the year.   Recently, the NCAA sold 14 years worth of television broadcast rights to the NCAA Tournament for $10.8 Billion.  On an annual basis, that comes to an annual sum of  $770 Million per year.  

The athletes who play in these games, by contrast, do not receive any share of the derived revenues, nor are they allowed to endorse products or sign autographs for money.  In addition, the most successful teams in this tournament will have athletes that are required to miss upwards of nine class days based on a tournament schedule that is created to accommodate television broadcasts.

As a guest blogger for the month of March, I will be discussing the legal issues related to NCAA amateurism and the economic realities of the NCAA men's basketball tournament.  Some of the topics I will discuss include why the NCAA is indeed an economic cartel, why the U.S. district court's decision in O'Bannon v. NCAA does not go far enough to protect college athletes, why perhaps the National Labor Relations Board should grant college athletes the right to unionize, and how the NCAA men's basketball tournament could be structured differently if student education, rather than athletic revenues, were truly a top priority.  

Thank you to Haskell Murray for providing me with this wonderful forum to share my ideas and scholarship.  And to all of the Business Law Prof Blog readers, please do not worry: I have no plans to be a Debbie Downer.  I will, however, talk seriously about the economic and legal realities of college sports and how we, as academics, can make a difference.