Antitrust Law Daily Claims against governing body for Olympic swimming go forwardgoverning body for Olympic swimming go forward
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Tuesday, December 17, 2019

Claims against governing body for Olympic swimming go forwardgoverning body for Olympic swimming go forward

By Nicole D. Prysby, J.D.

Switzerland-based FINA allegedly violated the antitrust laws by maintaining its monopoly and monopsony power over top-tier swim competitions and swimmers.

Claims that the governing body for Olympic swimming events uses its control over Olympic aquatic sports to determine the terms of compensation and competition for international swimming events outside of the Olympic games and its own competitions survived a motion to dismiss, the federal district court in San Francisco has decided. Swimmers and a swimming promoter sued the Federation Internationale de Natation (FINA), alleging that it knowingly interfered with the swimming promoter’s plans to host a competition in the U.S. The court possessed personal jurisdiction over Switzerland-based FINA given FINA’s extensive communications attempting to prevent the potential U.S. event. The claims were not blocked by the Ted Stevens Olympic Amateur Sports Act (ASA) because FINA is not the national governing body of swimming in the U.S. The Foreign Trade Antitrust Improvements Act (FTAIA) also did not bar the claims because FINA’s actions were aimed directly at the U.S., so the alleged conduct fell within the domestic effects exception to the FTAIA. Further, FINA and its member federations did not have unity of economic interest because they were distinct entities and at least potential competitors. Thus, they were capable of conspiring under Section 1 of the Sherman Act (Shields v. Federation Internationale De Natation, December 16, 2019, Corley, J.).

Allegations against FINA. Three professional swimmers and the swimming promoter International Swimming League (ISL) brought a class action on behalf of top-tier swimmers, alleging that Switzerland-based FINA uses its control over Olympic aquatic sports to determine the terms of compensation and competition for international swimming events outside of the Olympic games and FINA’s own competitions. ISL attempted to host swimming competitions in several locations including the U.S. but failed, allegedly because FINA threatened to sanction swimmers or FINA member organizations who participated in any events not sanctioned by FINA. The plaintiffs brought claims for violations of Section 1 and 2 of the Sherman Act and a state law claim for tortious interference with prospective economic relations.

All claims go forward. FINA argued that the court lacked personal jurisdiction over it. The court concluded that specific personal jurisdiction existed over nonresident FINA, as FINA purposefully directed its anticompetitive conduct at the U.S., through meetings or communications in which FINA discussed ISL’s potential events. For example, FINA was aware that ISL wanted to host a swim competition in Las Vegas, along with USA Swimming (a FINA member organization). After learning of ISL’s plans, FINA issued a letter to all member organizations stating that ISL competitions were not FINA-sanctioned or approved and that no FINA members were permitted to have a relationship with ISL.

Although ISL was also planning events elsewhere in the world, that did not eliminate the inference that FINA was aware of the proposed Las Vegas event hosted by USA Swimming and engaged in conduct to ensure that it did not occur in Las Vegas or elsewhere, the court opined. By issuing the letter to all member organizations, FINA knew that the consequences would be felt in the U.S. The plaintiffs’ claims arose directly out of FINA’s conduct—the alleged blocking of the U.S. event. And the court’s exercise of jurisdiction over FINA was reasonable, given the extent of FINA’s multiple communications with U.S. parties, the lack of a language barrier, and the fact that a substantial amount of jurisdictional discovery had already occurred. Although the claims could be brought in Switzerland, the factors overall weighed in favor of proceeding in the U.S. court.

The court also rejected FINA’s arguments that the complaint should be dismissed because the alleged conduct was protected under the ASA, the claims were barred by the FTAIA, and FINA and its members were not independent economic actors capable of conspiring to violate Section 1 of the Sherman Act.

Under the ASA, a national governing body has control over its respective sport. USA Swimming was the national governing body, but it was not a defendant in this action. Here, the plaintiffs were not challenging USA Swimming’s rules for international amateur athletic competitions, but alleged that USA Swimming actively worked with ISL to stage a swimming competition in the U.S. but dropped out of those negotiations following FINA’s threats that it would ban from the Olympic games any swimmers who participated in ISL’s event. For FINA’s argument to prevail, the court would have to find that the ASA protected FINA—an international federation, not a national governing body sanctioned by the U.S. Olympic Committee—from antitrust liability for conduct unrelated to a national governing body’s governance of international amateur competitions. The court declined to do so. Absent a challenge to the conduct of a national governing body covered under the ASA, there was no implied immunity for the antitrust violations alleged here.

FINA argued that the FTAIA barred the Sherman Act claims because the complaints expressly challenged foreign conduct undertaken by a foreign entity with little, if any, resultant effect on U.S. commerce. But FINA’s conduct was expressly aimed at the U.S. and the subsequent effects (e.g., loss of potential revenue) were substantial. Therefore, the alleged conduct fell within the domestic effects exception to the FTAIA.

As to unity of economic interest between FINA and its member federations, the plaintiffs adequately alleged that FINA and its member federations were distinct entities and at least potential competitors. Thus, they were capable of conspiring under Section 1 of the Sherman Act, according to the court. FINA comprises 209 member federations, which actually compete horizontally with one another and with FINA itself, in that individual federations and FINA separately organize and promote top-tier international swimming competitions. There was a distinction between FINA-organized and member-organized events, in that the member federations reap most of the financial benefits for their own events. This distinction was critical because it indicated that FINA and its individual member federations were not a single "economic unit" and at least had the potential to compete in the relevant market, in the court’s view.

This case is No. 3:18-cv-07394-JSC.

Attorneys: Neil A. Goteiner (Farella Braun & Martel LLP) for Thomas A. Shields. Christopher S. Yates (Latham & Watkins LLP) for Federation Internationale De Natation.

Companies: Federation Internationale De Natation

MainStory: TopStory Antitrust CaliforniaNews

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