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Protecting the silverware (and the sponsors): the Major Events Management Act 2007

02 October 2007

As one Rugby World Cup campaign reaches its culmination in France, the rules for the next one – the commercial sponsorship campaign when New Zealand hosts the Cup in 2011 – are already being set in place. Parliament has now passed the Major Events Management Act, designed to prevent ambush marketing and to enhance the rights of event organisers and official sponsors for that 2011 Cup and for other large-scale events hosted in New Zealand.

In this issue of Counsel we look at the new rules brought in by the Act and consider how they may be applied in practice.

This law was created specifically with the Rugby World Cup 2011, the Cricket World Cup 2015 and other high-profile sports tournaments in mind (the, ahem, America’s Cup yachting for instance). Such laws are not unique: the 2000 Sydney Olympic Games and the Cricket World Cup in the West Indies are just two examples of big events that have had special statutory protection.

Unlike in other jurisdictions, New Zealand has chosen to deploy "umbrella"-type legislation that is not specific to any event, but can be triggered in future by the Economic Development Minister whenever a suitable event-hosting opportunity arises. The first occasion to contemplate using the new protections might be the Netball World Championships to be hosted in November this year, but they now appear more likely to be given a warm-up at the FIFA Under-17 Women’s Football World Cup next year instead.

Ambush marketing

Ambush marketing is where one company pays to become an official sponsor but finds that another company or competing brand attempts to "gatecrash the party" by associating itself with the event or insinuating its commercial presence and "free riding" on the publicity generated by the event.

Corporate ambush attempts have been around for years and are as broad in scope as the ingenuity of marketing personnel is long. The idea came to prominence notably in the "sports shoe wars" where Nike, Converse, Reebok and Adidas competed to undermine each other’s official sponsorship of successive Olympic Games with increasingly creative publicity stunts. At the 1996 Atlanta Olympics, Nike smothered the roads around the stadium with billboards and handed out paper "swooshes" to be waved inside. This thoroughly sabotaged Reebok’s official sponsorship and led many spectators to in fact believe Nike was the headline event sponsor.

The difference these days is that the scale, grandeur and media hype around big events like the Rugby World Cup has dramatically increased the value of official sponsorship rights, and the revenue streams to organising bodies.

Since sponsors pay handsomely to support these events, the organisers now demand that to win the rights to global tournaments, host countries must take action to protect their official sponsors from exploitation. So it was with New Zealand’s bid for the IRB’s Rugby World Cup, where undertakings were given to organisers about toughening up our ambush marketing laws.

The new Act meets this promise to event organisers by primarily attacking:

  • ambush marketing by association
  • ambush marketing by intrusion, and
  • unauthorised use of Olympic and Commonwealth Games words and emblems.

But during the passage of the Bill through parliament two other "event management" issues were added, being:

  • ticket scalping and resale, and
  • crowd behaviour (pitch invasion and missile throwing).

As a result, much of the public debate has been about banning streakers and ticket touts, and the clampdown on what some see as mostly harmless activities, but in fact it is the restrictions on advertising that will affect commercial business and marketing professionals the most.

When is an event considered "major" enough?

A preliminary issue in each case is to decide whether an event should be classified as a "major event". The Economic Development Minister has wide discretion to decide which events are worthy of special protection above and beyond existing New Zealand laws like the Trade Marks Act and Fair Trading Act.

There are set criteria to meet when an event organiser applies to the Minister:

  • the event must be at least partly held in New Zealand
  • the organiser must be capable of successfully and professionally managing the event, and intend to use all existing legal avenues available to it to protect its intellectual property rights
  • a variety of other factors must be taken into account, including: the degree of overseas interest in the event (by participants, spectators, sponsors, and media); the tourism/profile opportunities or sporting, cultural, social and economic benefits for New Zealand; the level of professional management and co-ordination required to stage the event; and the likelihood of large numbers of Kiwi participants or spectators.

The Government has emphasised that since the protections in the Act have the potential to limit freedom of speech and commercial expression, it is aimed only at truly global, top-tier events (like World Cups). The Minister has stated that it should not extend to slightly lesser international events or things that New Zealand hosts annually. On that view, Bledisloe Cup matches or the recent round of the World Rally Championship might dip out, despite seeming to meet the other criteria. But regardless of current political intentions, there seems plenty of potential for furious lobbying in future to persuade the government officials that a particular event meets the criteria and should be given special protection.

The Minister also has power to specifically declare:

  • what major event words, phrases and emblems will be protected
  • how long the protections will be in place (this can start at any time, but must end within 30 days after the event finishes)
  • the exact geographic scope of "clean zones" and "clean transport routes" (areas where advertising is banned).

Of course, the Minister will be guided heavily by the event organiser who applies for these "declarations". If successful, that organiser then gains tremendous commercial power to specifically authorise individual activities that would otherwise breach the ambush marketing provisions.

Ambush marketing by association

Ambush marketing by association is basically any advertising, representation or conduct implying or likely to suggest an "association" between the major event and your brand or goods or services.

"Association" is a wide concept that extends to implying any relationship of connection, approval, authorisation, sponsorship or commercial arrangement with the event. Advertising that links a product with the major event even indirectly (e.g. by using images of trophies or teams involved in the tournament) will be at risk. In addition, a promotion that gives away or sells tickets as prizes is said to be ambush by "association".

Further, the use of whatever the Minister declares to be special "words and emblems" (e.g. perhaps the phrase "Rugby World Cup") or something closely resembling them, is deemed to be automatically in breach - unless an exception applies.

Ambush marketing by intrusion

Ambush marketing by intrusion is taking advantage of the assembled audience to promote your brand in a specific location around the event stadium or activity area. It might include simple street selling of merchandise, handing out promotional giveaways, or fly-past banners attached to aircraft or blimps.

The Minister can declare clean zones (essentially a match venue and its immediate surrounds), and also clean transport routes (extending up to 5 km along the length of key motorways, state highways and railway lines that spectators will use). These areas are tightly controlled during the "clean period" of time during, before, and up to 30 days after the event.

Private land and buildings cannot be part of the ‘clean zone’, but signs or billboards on private land may be in breach if they contain advertising within the zone, or even if outside the geographic zone but still clearly visible (to the naked eye) from within the zone.

Street trading and advertising of any type (not just that which suggests an "association") in clean zones is banned unless it has written authorisation from the major event organiser or unless an exception applies. Handing out merchandise, or arranging billboards or aerial displays will earn a red card (or rather, a fine up to $150,000).

Ticket scalping

Ticket scalping is, depending on your point of view, a scurrilous practice that pushes prices out of reach of the "true fans" who are keen to attend an event, or alternatively just the ordinary operation of a second-hand market allocating tickets to those on the demand side prepared to pay the most for them. Regardless, it has now become illegal to sell or trade a ticket to a declared "major event" at a value greater than its original sale price (including booking fees and ancillary charges). So a person can still place an unwanted ticket on an online auction site, but cannot recover more than the actual original cost of it. Taking a profit can incur a fine of up to $5000.

There were plenty of submissions made at the select committee parliamentary stage around this issue, and some suggestion that in future ticket scalping restrictions might be considered in a broader form, not just limited to those few events that qualify as "major events". It will be interesting to watch this space: for instance, are major rock concerts or New Zealand Warriors home rugby league games any less deserving of attention?

Finally, pitch invasion (whether of the clothed or unclothed variety) onto the playing surface or adjacent area, and propelling any object onto the pitch are made a specific offence, punished by a fine of up to $5000 or possibly up to three months in jail. Sporting institutions such as streaking or Mexican Waves are likely to become a thing of the past at big events, unless certain brave punters (Otago University students, perhaps?) are prepared to run the gauntlet.

Carve-outs and exceptions

Since this law impacts on sweeping areas of normal commercial activity, there have to be numerous exceptions to prevent ordinary firms being wrongly spear-tackled. This has the potential to create confusing legislation and lots of interpretation disputes yet to be somehow resolved. One key exception is for an existing business that is carrying on its ordinary activities. So if a local dairy or shop has had cola signs hanging outside for years, there should be no problem. But if it puts up new signage specially timed to coincide with the event, it may not be safe.

The array of exceptions includes expressions of personal opinion, reporting news or information, or honest use of a place name, your own name or a trade name. And, if you have written approval from the event organiser you will be fine.

As with any new law, particularly highly intrusive regulatory controls like this, a lot will still have to be worked out in practice when it is first actually used. Various strategies might be tried to test out exactly how broad the defences and exceptions really are, and just how vigorous the enforcement tactics might become. It will be a balancing act for event organisers and for those companies keen to "push the marketing envelope", and two particular thoughts could usefully be kept in mind:

  • Not all cunning marketing tactics can be stopped: at the Barcelona Olympics, Michael "Air" Jordan was not allowed to wear his famous Nike gear, but as he received a gold medal he cleverly covered up the Reebok logo on his official team tracksuit in front of the assembled television cameras.
  • Aggressive enforcement by organisers and the sponsors they are protecting might risk a backlash by jolting the Kiwi public to really get in behind a creative, subversive, witty (and unauthorised) brand.

Anyone with lingering doubts over how valuable sports rights can be should consider TV3’s recent lawsuit successfully injuncting SKY Television from over-use of its Rugby World Cup footage. TV3 reportedly paid about $12 million for broadcasting rights and showed it would not hesitate to aggresively protect them. Let the (legal) games commence ...

Who is affected?

The new rules will affect a variety of parties in different ways:

  • Sports bodies and event promoters will be keen to squeeze into the "major event" criteria wherever possible, to maximise commercial revenues.
  • Marketing executives at companies engaged in sponsorship will need to re-assess their contracts (the exclusivity value of official sponsorship is enhanced, but probably so is the price-tag); alternatively they will want to look carefully at the exceptions and loopholes for running "unofficial" promotions.
  • Advertising agencies, media companies and other promotions specialists will want to ensure they do not inadvertently breach the new rules when making communications on behalf of their clients.

To discuss the individual ramifications for your business, feel free to contact Chapman Tripp directly.

This issue of Counsel was quoted in MG Business magazine's cover story (26 November 2007), "Ambush marketers will be elusive targets," by Neale McMillan.

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