All out: Disrepute clauses in sponsorship agreements
As the crisis that is Australian Cricket continues to develop, the broader implications of the recent ball tampering scandal, particularly as it concerns the sponsors of the implicated players and Cricket Australia, are yet to be fully realised.
Chief Executive of Cricket Australia, James Sutherland, fronted a press conference earlier this week to announce that captain Steve Smith, vice-captain David Warner and batsman Cameron Bancroft would be sent home to await the inevitable further consequences of their actions. Notwithstanding the video evidence and investigations undertaken, Sutherland refrained from characterising the conduct of the players as “cheating” - possibly for fear of the potential ramifications for the sporting body.
Cricket Australia has promptly delivered its verdict, with Smith and Warner being stripped of their leadership positions and suspended for 12 months, and Cameron Bancroft suspended for nine months, citing breaches of article 2.3.5 of Cricket Australia’s Code of Conduct. Relevantly, the players were not charged with ball tampering under article 2.2.9 of the Code of Conduct, which specifies a Level 2 offence for:
“Changing the condition of the ball in breach of Law 42.3 of the Laws of Cricket, as modified by condition 42.1 in each set of CA’s domestic match playing conditions”.
Instead - possibly in circumstances where there was little or no evidence of change of the condition of the ball, or perhaps in an effort to avoid a formal finding of ball tampering - the players were charged under article 2.4.5 of the Code of Conduct. This article is a ‘catch all’ provision often relied upon by a sporting body where certain conduct is not adequately covered by the specific offences set out elsewhere in the Code of Conduct but, in the case of Cricket Australia’s Code of Conduct, is nonetheless conduct that:
Cricket Australia won’t be the only ones looking to rely on ‘catch all’ provisions in their contractual agreements with the players in order to sit them on the sidelines.
It is no secret that sportspeople can earn big money, not only from their player contracts, but also from sponsorship deals which can often exceed the amount of remuneration generated under a player contract. Likewise, sporting bodies such as Cricket Australia also heavily rely on lucrative sponsorship and ‘commercial partnership’ arrangements.
When a sponsorship contract is drafted, the sponsor (subject to the respective bargaining power of the player and sponsor) will often seek to include a term to the effect that the contract is able to be terminated at the sponsor’s will, or otherwise contingent upon the player’s good form both on and off the field. The latter is most commonly achieved by way of the imposition of positive obligations on the player to behave appropriately both on and off the field and to use best endeavours to pursue the aims of the contract, with the inclusion of a ‘catch all’ clause giving the sponsor a right to terminate the contract upon the player doing anything which might bring the player, or the sponsor (by way of association), into ‘disrepute’.
Whilst some contracts define the word ‘disrepute’ or may stipulate specific forms of conduct which are disreputable, the concept of disreputable conduct may be left open to interpretation, as was seen in the case of the Australian swimmer, Nick D’Arcy. Mr D’Arcy was selected to represent Australia at the 2008 Beijing Olympic Games. A few hours after his selection, he was involved in an incident where he struck a fellow swimmer, Simon Cowley, in the face with his elbow causing significant facial injuries. Consequently, his contract with the Australian Olympic Committee (AOC) was torn up. In that case, the Court of Arbitration for Sport (CAS) stated that “bringing a person into disrepute is to lower the reputation of a person in the eyes of ordinary members of the public to a significant extent”. Relevantly, in making its decision to uphold the AOC’s termination of D’Arcy’s contract, CAS concluded that a reasonable member of the public would think considerably less of D’Arcy on account of his conduct, notwithstanding the realisation that he may well have a defence to the criminal charges and ultimately avoid conviction.
It is fair to say that misconduct sufficient to bring a person, the game or a sponsor into disrepute may take many forms and a consideration of the issue will largely depend upon community standards. With the ever-increasing moral conscience of general society and business, (as demonstrated by the current public backlash and media frenzy) it would be hard for the players involved in the present scandal to maintain that they have not, at the very least, brought themselves into disrepute, if not also their sponsors and the sport itself.
In the current scenario, if the relevant players’ and Cricket Australia’s sponsorship contracts do not provide for (a) the sponsor to terminate the contract at will, or (b) that any finding of cheating (eg. ball tampering) will entitle the sponsor to a right to terminate the contract, then the sponsors will (assuming the contracts have been appropriately drafted) more than likely avail themselves to a right to terminate the contract under a general ‘catch all’ provision for bringing the player, the game and/or the sponsor into dispute, by virtue of their involvement in the ball tampering scandal.
As has already been seen, one of Warner’s personal sponsors, LG, has confirmed that it will not be renewing its soon-to-expire sponsorship deal with Warner on the basis that they look to work with ambassadors who “share our core brand values”. ASICS has now followed suit. The list of sponsors attaching to Smith and Warner (presently) includes big brands such as Channel 9, Gray-Nicholls, Commonwealth Bank, Sanitarium, Toyota and New Balance - just to name a few.
Similarly, the list of commercial partners tied to Cricket Australia is also extensive; although it seems inevitable the list will shrink in the coming days. Cricket Australia's Test naming rights sponsor, Magellan, has announced today that it has ended its three-year deal with Cricket Australia (which was reportedly worth $24 million). The Australian has reported that its understands Magellan has had “lawyers pouring over the Cricket Australia contract since the scandal unfolded on the weekend” and has now “invoked a clause in the contract which allows it to be terminated immediately if the company’s name is brought into ‘disrepute’”. Other major sponsors, including Qantas, have voiced their disappointment but have yet to formally terminate their relationships with Cricket Australia.
Of course, some sponsors may weather the storm for commercial reasons, notwithstanding any legal rights they may have to jump ship. See for example, Nike’s approach of remaining loyal to its stars, including the likes of Tiger Woods (when he was embroiled in a sex scandal in 2009), and Lance Armstrong whom Nike stood by notwithstanding the publication of USADA’s damning 1,000-page dossier exposing the him as a serial drug cheat (although Nike reversed its position a few days later). However, for better or worse, it seems fairly likely that most sponsors who haven’t yet done so will look to part ways with the players and/or Cricket Australia, so as to avoid any continued involvement in the fallout and the inevitable moral shaming which will take place if they don’t toe the line.
For further information or discussion, please contact Senior Associate, Jon Erbacher in HopgoodGanim Lawyers' Litigation and Dispute Resolution team. Jon has a particular interest and experience in acting for clients in the sporting industry, and is a member of the Australian and New Zealand Sports Law Association.