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Volume 23 No. 28
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Added step in Rule 40 tweak giving agents, brands pause

UnderArmour ran commercials featuring Michael Phelps during the 2016 Olympics under changes to Rule 40 that debuted that year.
Photo: Getty Images

Earlier this month, the U.S. Olympic and Paralympic Committee changed its interpretation of the Olympic Charter’s “Rule 40.” In so doing, it appeared to eliminate the most difficult barriers for brands hoping to sponsor individual Olympians during the Tokyo Games despite not having official sponsorship rights with Team USA. The change would free those brands to use Olympians during the Games without approval.

 

However, agents and brand consultants aren’t sure the process will be any easier because of a new step that could be a dealbreaker: They will be asked to sign a “personal sponsor commitment” with the USOPC, in effect promising they won’t mislead the marketplace by suggesting they have an association with Team USA or the Olympic Games that they haven’t paid for.

Agents say brands can’t determine the upshot without knowing exactly what new liabilities they’ll be asked to incur. That contract had not been published as of Oct. 24, neutering initial enthusiasm. 

“It seems backwards to be pushing it out there as a positive development, and focusing on the alleged changes that would be beneficial to the athletes in trying to generate some positive reaction, when athletes really haven’t had the ability to evaluate how it would affect their individual marketability,” said Peter Carlisle, head of Olympic and action sports at Octagon.

Brant Feldman, founder of American Group Management, said three brands have stopped discussions about his clients pending review of the contract. “They basically said come back to us when you have that, because we can’t start making decisions until we see it,” Feldman said. “So I’m still in a holding pattern here.”

USOPC officials have said the contract will ask brands to promise not to ambush official sponsors, such as Comcast and Hershey, who pay handsomely for rights to Team USA logos and protected terms. Also, the upfront relationship will provide clarity and certainty about the rules, and give the USOPC a breach-of-contract case if there’s a violation.

But standard intellectual property law has always given the USOPC the right to seek damages in court for misuse of protected rights. To the extent the Olympic rules go beyond IP law, it’s never been clear how enforceable they are anyway, Carlisle said. The primary means of enforcement currently is to prohibit the athlete from competing, which carries extraordinary public relations risk for the USOPC or Olympic organizers. 

“These so-called improvements and clarifications arguably convert an illusory rule into a contractual entitlement for the USOC, which becomes a contractual restriction for the athletes and the companies they’re looking to work with,” Carlisle said.

The new guidance on Oct. 8 eliminated the previous requirement for nonsponsors to submit creative work for approval from the USOPC; it also eliminated deadlines by which they must launch a campaign that intends to run during the Games. Also, brands can now congratulate their endorsers at the Games on social media — if they sign the contract.

Even if the contract is benign, it’s still a new legal relationship with a third party that will be thoroughly vetted by any brand’s legal staff while the clock is ticking to prepare 2020 campaigns, said Jeannie Goldstein, a founding partner with Chicago Sports & Entertainment Partners. “These are great, these are nice changes to see, but what I don’t know is how brands are going to react to this extra step,” Goldstein said.