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Sports Direct 0 – Newcastle United 2: Court of Appeal win for Newcastle United

Sports Direct has failed to persuade the Court of Appeal that it should be granted an interim mandatory injunction obliging Newcastle United to supply it with replica kit. 

The claim 

In March 2024, Sports Direct issued a claim in the Competition Appeal Tribunal (the Tribunal) against Newcastle United alleging that the football club breached competition law by failing to continue to supply Sports Direct with its replica football kit for the 2024/2025 season. 

The injunction application

Sports Direct made an application for an interim mandatory injunction. It asked the Tribunal to compel Newcastle United to supply it with replica kit while waiting for the full trial of its competition law claims. The Tribunal refused to grant the injunction, primarily because it felt Sports Direct had not advanced an arguable case in its substantive competition law claim. Of significance in the context of the appeal, the Tribunal also concluded that even if there had been a serious issue to be tried, the balance of convenience lay in favour of not granting interim relief. For more information on the Tribunal’s reasoning, click here (Sports Direct 0 - Newcastle United 1: First leg injunction defeat - Macfarlanes). 

The appeal

Sports Direct sought permission to appeal from the Court of Appeal. The Court of Appeal heard the permission application and the substantive appeal arguments in a rolled-up hearing on 9 May 2024. A week later, the Court of Appeal gave judgment granting permission to appeal, but dismissing the appeal itself. Although the Court of Appeal disagreed with the Tribunal’s reasoning, it came to the same conclusion that no injunction should be granted. 

In particular, the Court of Appeal said that contrary to the Tribunal’s conclusions, Sports Direct had presented a serious issue to be tried. The Court of Appeal said that the Tribunal had taken the wrong legal approach, as it had not fulfilled the requirement (when assessing an application for interim relief) to take the claimant’s pleaded and evidenced case at face value unless it is plainly false or fanciful. In its concern to avoid conducting a premature mini-trial, the Tribunal had entirely disregarded certain contested facts rather than taking Sports Direct’s pleaded case at face value. Notably, the Tribunal had appeared to accept Newcastle United’s position that its conduct should be judged on the basis that there was no existing supply to Sports Direct (since the club was under new ownership and had agreed a new kit manufacturing and supply arrangement with Adidas).

The Court of Appeal concluded that, as pleaded, Sports Direct’s claim did disclose a serious issue to be tried. If Sports Direct was correct in its assertion that the dispute should be viewed as a refusal to continue supplying an existing customer, it was at least arguable that the withdrawal of that supply might have a material effect on competition.

As a result, in order to determine whether to grant an injunction, the Court of Appeal had to consider whether:

  • damages would be an adequate remedy for Sports Direct if the injunction were not granted but Sports Direct subsequently succeeded at trial; and 
  • a cross-undertaking in damages would adequately protect Newcastle United in the event of the interim injunction being “wrongly granted”. 

The Court of Appeal agreed with the Tribunal that damages would not be an adequate remedy for all of Sports Direct’s pleaded losses, but equally that an undertaking in damages would not adequately protect Newcastle United from the losses it would suffer if it were wrongly required to supply Sports Direct on an interim basis. 

As a result, the Court of Appeal had to determine where the balance of convenience lay. The Court of Appeal agreed with the Tribunal that the balance of convenience lay in favour of not granting interim relief and, instead, ordering a speedy trial to minimise any potential damage to Sports Direct. The damage to Newcastle United if the injunction were wrongly granted would be more fundamental than it would be to Sports Direct if it missed one or two seasons’ supply of replica kit. Additionally, the Tribunal had been correct to take account of the weakness of Sports Direct’s case in reaching its conclusion on the balance of convenience.

Next steps 

The case is expected now to proceed to an expedited trial. We therefore wait to see if Newcastle United can score a hat trick.

Tags

litigation, cartels and abuse of dominance, competition disputes, blog