Although the commercial benefits of sponsoring high-profile sporting events are well known, there are also a surprising number of potential pitfalls. On the eve of the London 2012 Olympic Games, Ben Hobbs of Schillings assesses the myriad reputational risks involved for companies.
After seven years of waiting, the London 2012 Olympic Games are almost upon us. The world’s most high-profile sporting event will be seen by an estimated five billion people, giving unrivalled exposure to, and an intense focus on those who have sponsored the Games and the athletes taking part.
If global reach were the only noteworthy statistic, every company would want to be involved in Olympic sponsorship. However, with such vast exposure comes an increased risk that any indiscretion or negative issue will be seen by a worldwide audience. Protest groups can also take advantage of the exposure, as can competitors seeking to take obtain the benefits of sponsorship without having to pay for it.
Reputational risks lurk in all forms of sports sponsorship, particularly Olympic sponsorship. These must be borne in mind. It is important to be aware of them so that you can prospectively guard against them and prepare for if, and when, they materialise.
Should any of these risks materialise, the benefits of sponsorship could disappear in an instant and the reputations of those involved could be destroyed or damaged forever.
THE IMPORTANCE OF A COMPANY’S REPUTATION
Your company’s reputation is essentially how it is perceived by, and the degree of trust it inspires in, its key stakeholders and the general public. It is inextricably linked to commercial success, yet is often undervalued, particularly due to difficulties in quantifying its monetary value. It goes without saying that, if your company’s reputation is attacked or damaged, your business will invariably suffer.
Companies spend millions of pounds and several years developing their reputation. The global reach of the internet and the speed with which news can break or spread online have reduced the time it can take to damage or destroy a company’s reputation to seconds.
Numerous reputations are involved in a typical sports sponsorship relationship and when the Olympics are added to the mix, the risks are multiplied. Pre-relationship due diligence should include some analysis of the possible reputational risks. All parties should bear in mind the risks their reputations face throughout the relationship and what steps can be taken to protect against those.
THE REPUTATION OF THE OLYMPICS
While sporting events themselves are rarely in the news for the wrong reasons, the Olympics has not been completely immune to some reputational issues of its own.
Boycotts and politics
Only three countries have sent a team to every Olympic Games since their inception in 1896. Some miss Games due to non-qualification, however a number of countries have boycotted them for political reasons. The Suez Crisis; Apartheid and the Cold War have all resulted in boycotts. At Beijing 2008, there were calls for a boycott in response to China’s human rights record, disturbances in Tibet and the ongoing Darfur conflict but ultimately no nations boycotted those Games.
The Games have also been used by nations and athletes to promote political and ideological messages. The 1936 Games in Germany were used to further the Nationalist Socialist Party’s support of Aryan supremacy, which was somewhat undone by Jesse Owens’ four gold medals and other notable successes of Jewish athletes. The Black Power salute of Tommie Smith and John Carlos in Mexico City in 1968 is perhaps the best example of athletes using the Games to promote their own political views.
Performance-enhancing drugs are found in almost every sport, but Olympic doping offences are given wider coverage. After the high-profile disqualification of Ben Johnson in 1988, the eyes of the sporting world became more focused on doping. More effective tests were developed, which led to a drop in the level of top results in some sports. After the 1998 Tour De France doping scandal, the International Olympic Committee (IOC) took the initiative and pressed for an independent international agency to set unified standards for doping. The World Anti-Doping Agency (WADA) was formed in 1999 as a result. At the 2000 and 2002 Games, a sharp increase in the number of positive drug tests was found, particularly in weightlifting and cross-country skiing. The Olympic standard of drug testing is now seen as a benchmark for all sports to achieve.
The Olympic Charter now explicitly records that:
‘The IOC encourages and supports the promotion of women in sport at all levels and in all structures, with a view to implementing the principle of equality of men and women.’1
London 2012 will be the first Games at which female athletes compete in all the same sports as men.
However, by 2010, three countries had still never sent a female athlete to the Games. Brunei had only taken part in three Games and sent a single athlete each time, but Qatar and Saudi Arabia had been competing regularly with all-male teams. After pressure from the IOC, Qatar announced that it hoped to send a small number of female athletes to London 2012. Saudi Arabia on the other hand has resisted this pressure and is the only country to have legislation explicitly banning women from competing at the Olympics. Whether Saudi Arabia send an all-male team to London and, if so, whether this will be met with protests from those campaigning for equal rights remains to be seen.
The Paralympic Games run alongside the Olympics and allow athletes with a physical disability to compete against those with similar categories of disability. Due to the categories that the athletes compete in, this has led to some controversy where athletes overstate their disability so as to give them a greater chance of winning.
In addition, some athletes wish to compete in both the Paralympics and Olympics. ‘Blade Runner’ Oscar Pistorius is perhaps the most high-profile example. His prosthetic blades and desire to compete in both Games have led to criticism from disabled and able-bodied athletes, an International Association of Athletics Federations (IAAF) ban and a successful appeal to the Court of Arbitration for Sport. If Pistorius does qualify for both Games, he will become the first male athlete to compete in both, which is likely to bring fresh controversy.
In summary, the Olympics is a unique sporting event. Specific risks that may seem to feature more in particular sports or sporting events all come to prominence together at the Olympics. This means that anyone considering sponsoring an Olympic Games or an Olympian has a number of additional issues to consider that would simply not arise with a typical sports sponsorship deal.
GLOBAL GAMES, GLOBAL RISK
The Olympics is the most global of sporting events. 205 nations are represented and five billion people around the world will tune in to watch. This poses problems that other sporting events and sponsorships do not. The vast global reach makes the Olympics a prime target for those wishing to publicise an issue or raise a protest.
Dow Chemical have been Olympic sponsors since 1980 and became ‘Top Level Sponsors’ in 2010. They are responsible for producing the sustainable fabric wrap that will encircle the Olympic Stadium.
A number of countries, including India, have threatened to boycott London 2012 as a result. The reason for this is the Bhopal disaster, where between 3,000 and 11,000 people are believed to have died, and over 500,000 injured, as a result of a leak at a pesticide plant in December 1984, which was at the time owned by a Union Carbide Corporation (UCC) subsidiary.
In an out-of-court settlement in 1989, UCC agreed to pay $470m compensation. There followed a number of appeals and petitions by activists, unhappy at the level of settlement. The Indian Supreme Court upheld the figure in October 1991, but there have been a number of subsequent appeals and claims in other jurisdictions.
In August 1999, almost 15 years after the Bhopal disaster, Dow agreed to purchase UCC for $9.3bn. At this time, there was concern among some shareholders that Dow would assume responsibility for UCC’s role in the Bhopal disaster.
On the twentieth anniversary of the disaster in 2004, someone purporting to be a Dow representative appeared on BBC World News claiming that Dow was liquidating UCC and had agreed to clean up the Bhopal site and pay compensation. It transpired that the Dow representative was, in fact, an activist2. Despite Dow’s prompt public statement that the claims made were a hoax, Dow’s share price fell 4.2% in just 23 minutes, wiping $2bn off the market value of the company.
The Bhopal disaster has had and continues to have a substantial impact upon Dow’s business and reputation. It remains to be seen whether India or other nations will actually boycott the Games as a result of Dow’s sponsorship, but irrespective of this, the threat alone has made sure that Bhopal has again become part of the media agenda and has the potential to overshadow or affect Dow’s sponsorship and ongoing commercial activities.
NEW OLYMPIC HEROES
Sport, perhaps more than any other arena, has the potential to create instant heroes. There are numerous examples of gold medallists who have been relative unknowns before the Games.
Perhaps the best recent example of this is Usain Bolt. Three months prior to Beijing 2008, Bolt ran only his third 100m race, running sub-ten seconds for the first time in his career. Three months later he won three Olympic sprinting gold medals and became the first man ever to set world records in all three sprint events at a single Olympics. The ‘Lightning Bolt’, athletics’ hottest commodity, had arrived.
Bolt’s success in Beijing led to sponsorship and endorsement deals with Puma (the biggest athletic sponsorship ever) and others, leading to comparisons to the marketability of David Beckham, Michael Jordan and Cristiano Ronaldo.
Bolt’s rise to fame has been rapid and he will not be the last Olympian to shoot to prominence. Sponsors recognise this and want to do all they can to ensure that their athletes are the ones who can emulate Bolt.
Adidas are sponsors of Team GB at the London 2012 Games. In 2011 they ran a campaign throughout the London Underground which demonstrated the Games’ ability to make instant stars and also showed their recognition of the public’s insatiable interest in the country’s athletes. The advert was an empty photo studio with the following wording superimposed on it:
‘You don’t know me. You don’t know anything about me. You don’t know what I’m made of or just how much I’m capable of. You don’t know where I’ve come from nor where I’m heading. You know nothing of my highs or my lows. You don’t know how fast I am, how strong I am, how resilient I am. You haven’t got a clue what breakfast cereal I eat, what fragrance I wear or who I’m dating. You don’t even know my name. But you will.’
It is not only sponsors who need to be aware of the potential for instant fame and recognition. Athletes themselves should also appreciate the fact that they could be unknown one minute and then a household name the next. They should take the necessary steps to protect their and their family’s private lives, their reputations and their sponsorship deals before they find themselves in the media glare.
SOCIAL MEDIA AND THE OLYMPICS
At the time of the Beijing Games, Twitter had approximately 2 million and Facebook 100 million global users. These figures have increased substantially and ahead of the London Games, Twitter has approximately 140 million and Facebook 900 million global users. Social media is playing an increasingly important part of daily life and the Olympics is no different. The BOA chief executive said in January this year that London 2012 would be the ‘Twitter Games’ and that the BOA was in favour of athletes using social media forums, albeit in accordance with their instructions. The International Olympic Committee is also pushing for social media to become an integral part of the Olympics. From the figures, it is easy to see why. Recent statistics state that one hour of footage is added to YouTube every second3 and that at the end of Superbowl XLVI, 12,233 tweets were sent per second – the record for a sporting event4. 117,192 tweets could be sent and nine hours, 34 minutes and 48 seconds of footage uploaded to YouTube in Usain Bolt’s current world record time. Social media has the potential to spread infinite amounts of information and photographs worldwide in an instant. The BBC is also considering integrating social media into their TV broadcast coverage of the Games.
The use of social media by athletes, no matter how much guidance or instruction is given to them, is likely to cause issues over the course of the Games. It is not only athletes who pose a risk. In apparent contradiction to the British Olympic Association’s (BOA) promotion of the use of social media during the Games, London Organising Committee of the Olympic and Paralympic Games (LOCOG) have issued detailed instructions to the 70,000 volunteers that they are not to do things such as disclose their location, post a picture of backstage areas closed to the public, disclose breaking news about an athlete, tell anyone in their social network about a visiting athlete, celebrity or dignitary or get involved in detailed discussion about the Games online. They are however permitted to retweet or pass on official postings made by the London 2012 communications team and mention that they are working for London 2012 in general but without mentioning specific details.
THE RISKS OF SPONSORSHIP
The main risk involved in sports sponsorship, particularly that concerning the Olympics, is damage by proxy. Typically, you will have little control over a situation affecting the other party. The first you may know about the problem could be when it is in the public domain. The significance of the risk is directly related to the publicity the crisis attracts. With the virtually unparalleled publicity the Olympics enjoys, there can be very few problems or situations that do not find their way into the public arena.
A number of the biggest risks are set out below, followed by a précis of the legal and practical tools available to prevent, protect against or limit the damage caused by them.
The internet, particularly social media, is becoming an increasingly important aspect in the distribution of news. It is often the case now that stories will break on Twitter and then be picked up later by the mainstream media. The digital world has made the spread of news immeasurably faster. Rumours, allegations and scandal can now spread in seconds and reputational damage can occur almost instantaneously.
One significant online risk is that material remains online and is readily available indefinitely and can resurface at any point. Google is often the first port of call for anybody wishing to research an individual or company. As was recognised in Emlick v Al Nisr Publishing LLC :
‘… there is a certain magnetism or gravitational pull which can bring internet libels to the attention of those who are not even searching for it’.
In Clarke v Bain , Tugendhat J recognised the potential indelibility of allegations which have been published online:
‘The long-term effect of a libel has commonly been expressed in metaphorical terms, such as “the propensity to percolate through underground passages and contaminate hidden springs”… The position today can be expressed more strongly… The web makes a lie of the old cliché that today’s newspaper pages are tomorrow’s fish and chip wrapping. Nowadays, the things… in a newspaper are more like tattoos – they can be extremely difficult to get rid of. The web is an easily searchable repository of everything published online, which makes it a very unforgiving medium.’
Despite the above, Google itself will not be held liable for any defamatory content returned in search results. In Metropolitan International Schools Ltd (t/a Skillstrain and/or Train2game) v Designtechnica Corp (t/a Digital Trends) & ors , Eady J held that there had to be some mental element involved sufficient to attribute responsibility to before Google could be held liable. The ruling granted Google, with its automated web crawlers, further protection, as it would not be liable for defamatory comments returned in its search results even after it was placed on notice.
Social media controversies now spring up on a daily basis. These include examples of sponsorship relationships being ended or adversely affected, and reputations damaged, by a moment of indiscretion on Facebook or Twitter.
A good example of this in an Olympic context is Stephanie Rice, the Australian swimmer and triple Olympic gold medallist, who posted a homophobic slur on Twitter shortly after striking a sponsorship deal with Jaguar. Despite removing the comment and apologising, Jaguar terminated their sponsorship. The consequences for Ms Rice are clear and quantifiable. However, we cannot know the exact consequences for Jaguar, but the episode is likely to have resulted in a degree of damage for Jaguar’s reputation and brand. When searching for the athlete on Twitter, around half of the search results returned refer to the ‘offensive’ and ‘inexcusable’ tweets. These links will remain online forever and the company will always be associated with them.
Another area where social media can cause problems is the issue of promotion. In March 2012, the Advertising Standards Agency (ASA) made its first ruling regarding marketing on Twitter. It involved a campaign by Snickers featuring Katie Price and Rio Ferdinand. Katie Price’s tweets were about China’s GDP and the Eurozone crisis, while Rio Ferdinand tweeted about knitting a cardigan. There then followed a final tweet, which had a photo of the celebrities with a Snickers bar, the advert’s strapline and the hashtag ‘#spon’. The ASA ruled that all of the tweets should be considered as advertising, but ruled that consumers were not likely to be misled as the final tweet was so clearly highlighted as an advertising campaign.
Ambush marketing is primarily seen at high-profile events, where global publicity is virtually guaranteed. Ambush marketing is where a company seeks to obtain the benefits of official sponsorship without paying any sponsorship fees.
Prior to the 2000 Sydney Olympics, Ansett, an official sponsor, issued injunction proceedings against Qantas, who were not official sponsors but who ran adverts featuring Cathy Freeman and Olympic stadia. Proceedings were issuedf5, but the case was settled before a court decision was ever made. There was no declaration of infringing conduct, no injunction or corrective advertisement ordered and in all likelihood, Qantas were the victors.
Official sponsors of the 2012 Olympics should benefit from the London Olympic Games and Paralympic Games Act 2006 (the 2006 Act). The Act was aimed at fighting ambush marketing as well as controlling advertising, street trading, ticket sales and transport. Prior to the Act coming into force, event organisers were forced to rely on copyright, trade marks and contractual provisions to protect their interests. The 2006 Act should make preventing ambush marketing a great deal easier.
The key provision of the 2006 Act, so far as ambush marketing is concerned, is that it prevents a number of Olympic-related words from being used in a manner that is likely to suggest to the public that there is an association with London 2012. If there is such unauthorised use leading to confusion among the public, the ‘London Olympics Association Right’ is likely to have been breached, constituting a criminal offence potentially resulting in a £20,000 fine.
As the Olympics is unusual in not allowing sponsors’ branding in the stadia or on athletes’ clothing, the Act is likely to afford sponsors greater protection against ambush marketing and other unlawful acts, therefore enabling them to make the maximum return on their investment.
Ambush marketing can also be a contributing factor to another risk of event sponsorship, which is public misconception. A recent poll by the Newspaper Marketing Agency6 found that:
- 50% of adults can spontaneously name at least one Olympic sponsor;
- More than a quarter surveyed could not name a single Olympic sponsor
- Only four sponsors (McDonald’s, Coca-Cola, Visa and Lloyds TSB) achieved more than 10% spontaneous recognition
Nike (not an Olympic sponsor) achieved a spontaneous recognition of 4%, just behind the 6% achieved by Adidas, an official partner.
LEGAL AND PRACTICAL TOOLS
Practically all companies will have disaster recovery plans, to enable business to continue in spite of a terror attack or travel chaos. Similarly detailed plans should be in place to deal with any reputational issues that arise and, ideally, prevent them from becoming reputational crises.
Insurance policies are now an increasingly common way to protect against reputational damage, typically in connection with sponsorship. They typically cover costs involved with terminating that relationship and beginning another. The cover will usually only include circumstances in which the other party’s actions were unforeseen or out of character. Pre-relationship due diligence clearly has a part to play in determining whether to take out such policies, or indeed pay out on them in the event of reputational damage.
When a media crisis arises, particularly an unforeseen one, the worst situation you can face is one in which you lack a defined strategy. In such a situation, there is the risk of mixed or confusing messages being given to the press and the public, significant delays while decisions are discussed and made and a lack of understanding as to what legal options, and the benefits and risks of taking those, are at your disposal.
Your company’s reputation
There are a number of steps you can take to protect your company’s reputation and ensure that an event does not adversely affect your business, your corporate relationships and the reputations and business of those who you are involved with.
First, internal reviews should be carried out to identify key areas of risk. Do your company’s current actions, business plan or historic activities risk causing a media crisis? Do senior executives have skeletons in the closet that could impact on the company? Do you have highly confidential information or documents stored on your IT systems and if so, are these sufficiently secure? Once key risk areas have been identified and investigated, plans need to be drawn up, both from a communications and legal perspective.
Ideally your company will know who is going to deal with a crisis and how, before it arises. Time is a precious commodity and investing time in guarding against reputational risks before they arise can save a great deal of time and damage when that risk materialises.
The other party’s reputation
Similar consideration needs to be given to the other party to commercial relationships and plans need to be in place to deal with issues and crises affecting them, as time will usually be even tighter in such circumstances. A rapid decision will need to be made depending on the details of the crisis being faced, but strategies should be in place that can be executed following that decision.
One such strategy includes extricating yourself from the relationship, if sufficient contractual provisions are in place. However, whether you withdraw will depend on the effect that this step would have on your company’s reputation. There are examples of companies sticking by a damaged partner or sponsee and achieving significant reputational advantage and financial benefit for doing so. Considering the potential options and weighing up the benefits and risks of certain responses is something that is best done before a situation arises, so that you have sufficient time and resources to analyse the options and enable the best decision to be made if the crisis does arise.
Having detailed strategies in place and a communications team and legal advisers who know your business and are ready to deal with a crisis instantly can make the difference between effective reputation management and significant reputational damage.
Your company’s reputation is a valuable asset. You should do all you can to protect against the risks it faces. When a potential media crisis strikes, those who deal with it best are well prepared, have systems in place to prevent the media crisis blowing up and take steps quickly to prevent damage to their reputation or restore it after the event.
Preparation is the vital element. You need to analyse what risks are faced by your company now and what risks it may face in the future. Once these risks are known, appropriate advice can be sought so that appropriate actions can be taken to reduce those risks and contingency plans can be considered and drawn up so that they are there, ready to implement if necessary.
The benefit of the time and money spent on proactive steps will be infinitely greater than the time, expense and hassle incurred in the event that a media crisis does arise. There are of course steps that can be taken after the event to restore a reputation, however some damage will already have been done.
When it comes to reputation management and maintaining successful sponsorship relationships, especially when the Olympics is involved, it is of paramount importance that you are prepared.
By Ben Hobbs, solicitor, Schillings.
- Rule 2, paragraph 7 of the Olympic Charter.
- Under the Trade Practices Act and the Sydney 2000 Games Indicia and Images Protection Act.
- http://www.nmauk.co.uk/nma/uploads/21950/nma_olympic_ insights.pdf.
Clarke v Bain  EWHC 2636 (QB)
Emlick v Al Nisr Publishing LLC (Unreported, 15 July 2009)
Metropolitan International Schools Ltd (t/a Skillstrain and/or Train2game) v Designtechnica Corp (t/a Digital Trends) & ors  EWHC 1765 (QB)