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Licence to kill: football merchandising agreement “undone” by High Court

Natasha Rao

In SDI Retail v Rangers Football Club, the High Court held that Rangers FC should not have entered into a merchandising agreement with a third party without giving Sports Direct, the existing licensee, an opportunity to match the third party’s offer (under the terms of the licence).

The main question was whether a requirement that Rangers FC provide Sports Direct with written notice of a third party offer (to give them the chance to match it) – and a prohibition on the club from accepting the offer if Sports Direct then exercised its matching rights – applied even when Sports Direct had previously been given the opportunity to match an offer in respect of the same rights covered by the new offer.

The High Court found that the provision, which required Rangers FC to provide Sports Direct with the written notice, was to be construed broadly and had therefore been breached. Sports Direct had the right to be given the opportunity to match an offer in respect of specific offered rights even if it had been given the same opportunity on a previous occasion. In the same vein, Rangers FC was prohibited under another provision from contracting with the third party, Elite, as this granted rights to Elite in respect of which Sports Direct had already exercised its matching right. Rangers FC’s argument that this interpretation would have an anti-competitive or impractical effect failed.

A rare mandatory injunction was granted by the court to force Rangers FC to “undo” its agreement with Elite, on the basis that both parties had entered into that contract “fully aware of the risk that Sports Direct would object to it” (for example, they had included specific warranty / indemnity provisions). For these reasons, Elite’s later application to have this injunction set aside was denied.

Comments published on Compact Contract do not necessarily reflect the views of Allen & Overy or its clients.

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