Liverpool FC -v- New Balance

Further to an article in our Autumn 2019 Contentious Business Update and the proceedings between Liverpool FC and New Balance heard before the High Court, the Court has held that, Liverpool FC, the current European Champions are not obliged to enter into a new agreement with the sports kit manufacturer, New Balance. We provide an update.

Liverpool FC is currently associated with New Balance, with the manufacturer having supplied the club’s kit since 2015. Being the current Champions League holders and with their current agreement (worth a reported £45 million per annum) due to expire in May 2020, New Balance had been understandably keen to renew its contract with the club.

In 2018, having failed to agree renewal terms, New Balance consented to the club seeking offers from rival third parties. In July 2019, Liverpool FC provided New Balance with a signed contract between it and Nike which was subject to a condition precedent to Nike by Liverpool that should a ‘valid match’ be provided by New Balance ‘on terms no less favourable to the club than (i) the terms of this Agreement and/or (ii) the material, measurable and matchable terms of such third-party offer’ the contract entered into by Nike would terminate. New Balance put forward a counter-offer in August 2019, on terms which it considered at least matched Nike’s offer by guaranteeing payment of at least £15 million more per season. Unfortunately, the club did not consider it to be ‘genuine’ and considered, specifically, that the marketing and distribution clause did not match the terms of Nike’s offer and New Balance’s offer was rejected.

New Balance subsequently commenced proceedings. The sole or principal question for the Court was whether New Balance had indeed matched Nike’s offer.

The club argued that the offer received from Nike could not be matched by New Balance primarily in terms of Nike’s distribution and marketing strength. Guy Morpuss QC, representing the club, argued that the claim was really an attempt by New Balance to use a matching clause for a purpose for which it was never intended’. He said New Balance’s contention that it could distribute Liverpool kit to 40,000 stores was ‘a myth’, adding that the company had ‘grossly overstated’ the number of stores it could distribute to. In written submissions, Mr Morpuss said that New Balance’s claim to be able to match Nike’s 6,000-store offer was ‘inconsistent with New Balance’s historic performance’ and ‘manifestly implausible’, adding that the company had used ‘a series of artificial devices to pretend that it could reach the 6,000 figure’.

In an expedited three-day trial, the claim was dismissed by the Court, which ruled that the club was not obliged to accept New Balance’s counter offer. The Court held that the New Balance offer was in fact less favourable because the supplier could not promote its products with the rich list of global superstars at Nike’s disposal or stock the kit in as many global retail units as Nike. Inevitably the devil was in the detail. New Balance, by agreeing to match all the ‘material, measurable and matchable terms’ of any third party offer in the underlying agreement, had exposed itself to considerable risk and uncertainty, and was simply not able to match Nike’s offer on terms which could trigger a renewal.

The Court ordered that a proportion of Liverpool’s fees be paid by New Balance (20%), whilst on 1 November 2019 the Court refused leave to appeal.

The decision leaves Liverpool FC able to press ahead with a new deal with Nike, set to be one of the most lucrative in professional football.

For further advice on any sports-related issues, please contact Jon Scally.