Sponsorship Law

The international sponsorship market has exploded. It is estimated that its world-wide value in 1984 was US$2.b. By 1992 it had increased to US$9.4b and by 1997 to US$18.1b (source: Sponsorship Research International). The motivation of sponsorship is strictly commercial. This contrasts and runs in tandem with the charitable and philanthropic expenditure of international commerce. Sponsorship is seen as an investment in return for access to an exploitable commercial media mix associated with the sponsored event. Sponsorship activity is undertaken widely by all of the advertiser industries, tobacco, alcohol, banks, car manufacturers, financial institutions, electronic companies, retail groups and soap and detergent manufacturers. As conventional advertising is becoming increasingly expensive sponsorship can be a cost efficient route to exposure to a mass audience. Broadcast sponsorship, event sponsorship, sponsorship of the Arts, Personality and Star Endorsement as well as Merchandising are the most frequently preferred sponsorship tools.

With growth, sponsorship is also becoming increasingly regulated by the industry across borders. The International Chamber of Commerce Code on Sponsorship of November 1992 came into existence in recognition of the significance even then of sponsorship as a mode of commercial communication beneficial to all parties concerned including the sponsors, the organisers, the media, the performers and the general public. The code set down basic principals and guidelines for good practice and fairness, complementing existing national self-regulatory rules. It defines sponsorship as “any communication by which a sponsor contractually provides financing or other support in order to establish a positive association between the sponsor’s image, identity, brands, products or services and a sponsored event, activity, organisation or individual”. It sets out objectives of good sponsorship practice by providing that sponsorship communications “should be clear and accurate”, sponsorship “should respect the autonomy of the sponsored party” and its “creative freedom”. The parties “should avoid imitation… where such imitation might mislead or generate confusion”. It provides for the conduct of the parties to the sponsorship who “should take particular care to safeguard the inherent artistic, cultural, sporting or other content of the sponsored activity” and who “should never obscure, deform, demean or impugn the image or trademarks of the sponsor”. The sponsor’s message “should not deliberately offend the audience’s religious, political or social convictions or professional ethics”. It makes particular provision for children and young people and the safety of artistic and historical objects. Importantly the code has particular provision for the need for contracts to clearly provide for the rights and obligations of multiple sponsors or pools of sponsors. It provides for good practice in television, radio and cinema sponsorship and requires consideration for the environment.

These ideals and disciplinary aspirations are frequently reflected in the many national industry-generated sponsorship rules which not only have the industry’s interest, but also the public’s interest at heart in ensuring high standards. Care is taken to balance the sponsor’s commercial ends with the overriding public interest in the integrity of the sponsored programme or event.

National and cross-border sponsorships, whether via satellite or because of the international nature of the event such as motor racing, football or the Arts will give rise to complex legal relationships. Care and definition are critical to the success of the sponsorship relationship. Contracts identifying and defining the parties, their rights and obligations to each other and harnessing the commerciality of the rights granted are fundamental to this expanding industry which lays layer upon layer of contractual relationship in an increasingly cluttered field. Sponsorship is not merely to be left in the hands of the agents, marketing men, television producers, impresarios and managers. Unless the arrangements are transparent, binding and enforceable, the sponsorship is likely to fail. There are many types of insurance contracts which reduce this risk and which play an important part in supporting the prospects of the sponsorship’s success but even those policies of insurance require careful scrutiny. The parties will need to examine the legal implications, country by country, having regard to the statutory law and the self-regulatory codes. This legal investigation may also be conducted on a province to province basis, nationally, as local laws vary. Issues of intellectual property rights, licensing, property law, real estate, competition law, broadcasting law, consumer information, consumer credit, occupiers’ liability, confidentiality, jurisdiction and applicable law are of immediate concern in every form of sponsorship, national or international.

Broadcast sponsorship and other sponsorship opportunities are expanding as investment increases. As yet the sponsorship spend is still in single figures when seen as a percentage of the European wide advertising expenditure. 2/3 of the total European expenditure on broadcast sponsorship is in Italy, Spain and France and it is a significant commercial communicator also in Holland, Greece and Austria. Globally, the World Cup, for example, has become a showcase and sponsorship is the engine which drives its success.

The European Commission Green Paper on Commercial Communications looks at how sponsorship can support and stimulate competitive film and television production. Events guaranteed to reach a pan-European audience are highly rated by sponsors. The objective of creating a Single Market for commercial communication still is restrained by the variety of national laws. The increasing convergence of self-regulatory standards, good practice and disciplines, internationally endorsed by the 1992 ICC Code, ought to facilitate, along with satellite and digital broadcasting technology, a significant surge in the sponsorship spend. This is a development which EALA is happy to be part of.

For further details on TV Sponsorship law click here.