Breaking endorsements for sports stars and sporting teams

Are there any reasons why  – is it legal to do so?

The sporting endorsements market

Both sport stars and sports teams make huge amounts of income through sponsorship deals in relation to the sporting side of their profession, such as football players being sponsored by a specific sporting company who will provide them with football boots.

However, since the onset of sporting players into the celebrity arena there has been much more scope for sports stars to enter into commercial deals which are not involved with the sporting side of their profession. These deals will be termed endorsements.

What is an endorsement?

An endorsement is a deal whereby a company will pay an individual for their brand to be associated with that individual. Often if a sporting star is a world renowned individual who is seen by many as a role model and who has value such as integrity shown by his actions on the pitch brands feel that it will be good for their business to be associated with that person. They will therefore pay that individual for them to endorse their product.

How will that individual endorse the product?

The individual will be seen to be endorsing the product by appearing in advertising campaigns both on television and in the print media for that particular product.

Is this a valuable market for companies?

Endorsement by celebrities and sporting stars is an extremely valuable market for brands as the already existing public opinion of a sports star will be something that the individual has created themselves so there is little market research required on the part of the company. Furthermore the sway that sporting stars have with the public is extremely high, often more so than other forms of celebrity which will often cause a dramatic increase in sales of the product following an endorsement.

How are endorsements created legally?

Legally endorsements will be created through an endorsement agreement between the individual sporting star and the brand which they are endorsing. The following issue will be covered in the endorsement agreement:

  • The term of the agreement
  • Payment to be made to the individual
  • What promotional work will be required
  • Issues in relation to competitors of the brand – usually the individual will not be able to wear or be seen to use any products of a competitor

The agreement will be agreed upon by the company and the individual sportsperson’s representatives. In the case of a footballer if they are represented by an agent, the agent will be used to negotiate the best terms of the deal for the player and in most cases will take a percentage of the fee.

It is for this reason that many footballers are represented by an agency rather than just one agent meaning that different agents can negotiate different deals for them relying on specific expertise.

Can an endorsement contract be broken by the company throughout the term of the agreement?

There have been recent examples of a company breaking an endorsement contract during the term of the contract. This has been done legally.

What were the reasons for the contract being terminated?

In recent cases contracts have been terminated where the sporting star has behaved in a way which contradicts the image which is usually presented and the image which the company has bought into. For example if a sports star has portrayed the image of a family man to the media often seeming more concerned with his family than his career this is an image that is often bought into by various brands through endorsements. However, if the individual is subsequently found to have been having an affair or a number of affairs the image which the company is buying into will be broken.

If a contract is terminated on those grounds, will it have been done legally?

In this situation the termination of the contract by the company will have been done legally as the individual sportsperson will have been deemed to have breached the contract by discrediting the public image that the company has bought into.

It is likely that the maintaining of this public image forms a material term of the contract. The fact that a material term has been breached would enable the other party to legally terminate the contract.

Can sports teams have their endorsement agreements terminated?

It is not only individual sportspersons that can be the subject of endorsement agreements, these are also often used for sporting teams.  It follows that these agreements can also be terminated for breach of contract.

Under what circumstances could these agreements be terminated?

Legally it would be extremely difficult for an agreement to be terminated on grounds of poor performance of a team as that is something that can often happen in the sporting context and must be viewed as part and parcel of agreements of such nature.

However, in certain circumstances the behaviour of an entire team can necessitate the termination of a contract.

When will this occur?

This may occur if for example during a worldwide sporting event a team behaves in such a manner that is deemed unacceptable. As the world’s eyes are fixed on the event the poor behaviour of certain members of a sporting team can have a big effect on the endorsement contracts. This can be seen recently following the behaviour of the French team at the World Cup 2010 causing the Federation to lose many of their endorsements.

What effect can the loss of endorsements have?

Clearly the individual or sports team which has lost their endorsement will lose out in monetary terms but this may also be felt by third parties. For example following the high profile behaviour of one of golf’s most well known names a huge amount of endorsements have been lost by the individual. This has also had an extremely damaging effect on the company that represents him who gain fees through the endorsement contracts. Reportedly the company has lost in the region of $4.6million.