8th November 2022
Walker Morris’ specialist Sports lawyers Luke Jackson, India Seaton and Christian Slinger discuss the potential dangers and pitfalls of entering into sponsorship agreements with partners in high risk industries following the recent controversy surrounding Barnsley Football Club’s partnership with cryptocurrency site HEX.com.
Barnsley Football Club recently ended their new front of shirt sponsorship agreement with cryptocurrency site HEX.com, just one week and two games after the League One club announced the deal. The end of the agreement came off the back of an investigation into discriminatory and abusive social media posts, which included a series of vicious and homophobic tweets, believed to have come from individuals who claim to have brokered the deal.
Following the club’s investigations into the controversial posts, it released a statement on social media stating that the club “value our fans and our core beliefs above everything else. Following recent events and a subsequent investigation, the club has assessed its relationship with its front of shirt sponsor and has taken steps to end that relationship with immediate effect. The HEX.com logo will not appear on the team’s kits going forward.”
The club’s current situation highlights how important it is to consider the reputational risks associated with a brand before entering into a partnership with them. As an additional layer of protection, ensuring that these risks are adequately addressed in the drafting of a sponsorship agreement can also be a key tool in mitigating them.
Clubs regularly act as ambassadors and endorsers of various brands. Such arrangements are a vital source of revenue in the sports sector and this is unlikely to change any time soon.
One of the downsides of such arrangements is that their very existence results in a club relinquishing a certain degree of control over its reputation. This is because each of these brands operates independently to the party they are sponsoring and, therefore, falls outside of a club’s direct control. A club can resolve internal issues by disciplining and/or ultimately removing a problematic employee, but they will need to rely on the contractual protections in place with the offending brand in order to resolve such issues and avoid public embarrassment.
The issues encountered by Barnsley Football Club highlight a key aspect clubs must consider before entering into any commercial sponsorship agreement/deal. A partnership with a brand that is found to have been behaving unethically or illegally can be damaging simply by association.
Following the advent of social media, the period is more like five seconds in today’s world.
In 2016, Liverpool fans were left outraged after a new club sponsor, UK-based watch brand Holler FC, mocked the club just hours after the deal was made public. Following a statement made by Holler FC, which confirmed that they were “The official timing partner of Liverpool football club“, they seemingly could not resist aiming a dig at the club, who were without a league title since 1990 at the time. The controversial tweet read “When Arsenal last won the league Marcus Rashford was 6-years old. When Liverpool last won it his Dad was 10.”
Although the tweet was quickly removed, there was a significant backlash from Liverpool fans, with many calling for the sponsor to be dropped and questioning the club’s decision-making process.
Environmental, social, health and governance matters are becoming increasingly important across the globe and football sponsorship is no exception. Football supporters are paying closer attention to the partnerships their clubs are entering into and this is something clubs will need to take into account in their decision-making.
Some examples of heightened scrutiny when it comes to sports partnership deals are:
Given that companies with potentially “tarnished” reputations are likely willing to pay more to gain affiliation with a club, there may well be a monetary benefit in entering into sponsorship opportunities with them.
However, the above examples highlight the importance of conducting proper due diligence of the partner (including reviews of their social media accounts) and assessing any adverse reputational impact of entering into an agreement in the relevant sector or industry. This will help the club to make an informed decision as to whether the rewards outweigh the risks.
In light of recent events in Ukraine, it’s now even more important that clubs pay particular attention to sanctions rules and regulations when conducting their due diligence.
If a decision has been made to proceed, there are various contractual protections that should be included in the sponsorship agreement to help protect the club from reputational damage. These include:
Walker Morris’ specialist Sports lawyers are highly experienced in acting for football clubs and, in particular, have extensive knowledge and expertise in advising Premier League, EFL and National League clubs on sponsorship matters. Ranked in the top tier by leading independent guides to the profession, Walker Morris is one of the few firms in the UK that can offer the complete sports law service.