Following a four-year investigation into UK horseracing, the British Horseracing Board (BHB) and the Office of Fair Trading (OFT) have provisionally settled their differences. This month the OFT proposed to close its investigation after the BHB offered certain legally binding commitments. This coincided with the BHB publication of The Modernisation of British Racing, covering key horseracing issues such as governance, fixture allocation, race planning, prize money and the central selling of BHB’s database rights.

The long-running OFT saga, which began in June 2000, stems from a period of change within the sport. But the legal landscape has also been changing. Post-Competition Act 1998, the BHB, together with the Jockey Club, decided to make a precautionary notification to the OFT of the Orders and Rules of Racing and related governance agreements. This decision was taken in order to place the BHB in the best position to resist any competition challenge that might arise from either the OFT or third parties.

It proved the right decision: a year after the notification, a series of complaints by bookmakers culminated in a separate OFT investigation into the supply by the BHB of pre-race data to online bookmakers. This was a serious challenge, as it attacked the basis of the commercial replacement for the future funding of the sport.

The OFT alleged that the BHB’s pricing policy was discriminatory and excessive and its licensing terms restrictive. But following agreement between major bookmakers and the BHB on the licensing of access to the BHB database, the OFT refocused its investigation, this time scrutinising various aspects of governance.

In April 2003, the OFT issued a Rule 14 Notice (a statement of objections) against the BHB and the Jockey Club. The crux of the OFT’s concern was the strong position held by the BHB as the governing authority of UK horseracing, and limitations contained in the orders and rules on participants’ freedom. The BHB considered that this concern was founded on a fundamental misunderstanding of the nature of UK horseracing and sport generally. It also ignored a relevant European Commission precedent and failed to recognise that sport has special cultural and social functions – factors to which competition law must have regard. The OFT reconsidered its preliminary conclusions in light of the factual, legal and economic arguments put forward by the BHB and the Jockey Club in their written and oral response to the Rule 14 Notice.

Following months of negotiations in early 2004, the OFT announced that it proposed to accept from the BHB certain commitments. These would in essence bind the BHB to implement the changes proposed as part of its modernisation programme.

If the OFT had maintained its original position, the consequences for UK horseracing and other sports would have been devastating, striking at the heart of the governance of sport.

If one compares the OFT’s concerns set out in its summary of the Rule 14 Notice and the press release it issued in the context of the proposed settlement, it is evident that the OFT has very significantly revised its views.

It now accepts the need for strong central governance, the necessity for some limitations on the behaviour of sport participants and the centralised sale of data.

Furthermore, and equally as important, the OFT has closed its investigation into the Jockey Club, accepting the need for an effective regulatory body with real powers.

In light of this case, the question other sporting bodies need to ask themselves is whether their model is sufficiently close to that of UK horseracing so as to benefit from the approach that the OFT proposes to adopt in this case. In particular, a balance has to be achieved between the need for sports governance on the one hand, and the need to avoid unreasonable and therefore unjustifiable limitations on the conduct of those participating in the sport on the other hand.

With the abolition of the notification system, the introduction of criminal sanctions and the possibility of disqualification of directors, these questions are, if anything, even more important after 1 May 2004.