jul 29, 2018 - It is announced that Rangers face £500,000
legal bill as Sports Direct retain right to sell
club's kit following an out of court settlement
Description:
The licence agreement with SDI Retail
Under that new licence agreement (the Agreement), SDI Retail was granted an exclusive right to distribute all replica Rangers kit (and other branded products) from the club’s Ibrox "Megastore" and on Rangers’ website, together with non-exclusive rights to manufacture, sell and distribute Rangers-branded products throughout its 900 UK stores.
Similar to the deal between Nike and Manchester United, the Agreement granted SDI Retail a right of first refusal in the event that Rangers received a rival offer from a third party. This was referred to in the contract as “the matching right” and applied for two years beyond the date the Agreement expired (31 July 2018).
Under the relevant clause of the Agreement (paragraph 5 of Schedule 3), Rangers were allowed, at any point during the final six months of initial term, to
“approach, solicit, tender for or enter into negotiations with a third party in relation to that third party providing any of the Offered Rights” (defined to include each of the rights, whether exclusive or non-exclusive, granted to SDI Retail).
However, in the event that an offer was received from such a third party, Rangers were obliged to provide SDI Retail with “written notice of the terms of the third-party offer”, which notice was to
“include whether the Third Party Offer is made for any of the Offered Rights or all or any combination of the Offered Rights… and full details of (1) any payments to be made by the third party to Rangers and (2) any revenue share or royalties to be paid between Rangers and the third party”13.
Once notified of such an offer, SDI Retail thereafter had 10 days in which to exercise its matching right and, if it did so, Rangers were not permitted to “approach, solicit, tender for, negotiate with or enter into any agreement with that third party or any other third party in respect of the Third Party Offer and/or any of the Offered Rights” and instead were obliged to enter into a further agreement with SDI Retail. Clause 5.9 further provided that “any new or amended offer or indication of interest from a third party in respect of any of the Offered Rights shall be a separate Third Party Offer and the terms of this paragraph 5 shall apply.”14 In other words, a new or amended third party offer would trigger Rangers’ obligation to notify SDI Retail of its terms. As will be seen below, this provision played a crucial role in the High Court’s ruling.
In June 2018, Rangers received an offer from Elite Group, a company with ties to Rangers’ latest strip manufacturer Hummel, to purchase kit licensing rights. In accordance with its obligations under the Agreement, Rangers formally notified SDI Retail of that offer and thus granted it an opportunity to match the bid. The subsequent negotiations between Rangers and SDI Retail stalled due to disagreements over the amount of information on Elite’s bid that Rangers were obliged to provide. As the Agreement between Rangers and SDI Retail neared its expiry, SDI Retail, being aware of Rangers’ eagerness to market its new kit before the new season began, requested formal undertakings from the club to the effect that they wouldn’t enter into any agreement with a third party (i.e. Elite Group) without first having fully complied with the terms of the Agreement.
Rangers, who by this point (28 June 2018) were acutely aware of the prime marketing opportunity that the pre-season period represents for football clubs, denied that request and wrote to SDI Retail, warning them that “unless SDIR timeously exercises its matching right under the [Agreement], [Rangers’] intention is to accept the Third Party Offer". As Rangers later submitted in their witness statements, “being able to market a new football strip for the start of the season is essential to maximise impact and sales”. Failing to do so, Rangers continued, would “impact upon the ability to bring in players in the transfer window in August and, hence, on on-field performance”.
Against that backdrop and in light of Rangers’ threat, SDI Retail applied for and were duly granted an interim injunction restraining Rangers from entering into an agreement with a third party, at least until the terms of the Agreement had been examined at trial. As it turned out, the Court didn’t get a chance conduct such an examination after the parties reached an out-of-court settlement to continue negotiating a new deal. When considering costs however, Mr Justice Phillips found that Rangers had, by agreeing to continue negotiations, accepted SDI Retail’s claim that it was entitled to match Elite’s offer and duly ordered Rangers to pay SDI Retail’s £350,000 legal bill, along with their own costs of around £180,000. He noted that negotiations for a new deal were ongoing and urged both parties to “make peace”, a plea that seemingly fell on deaf ears in the Ibrox board room…
https://www.bbc.co.uk/sport/football/45010542
Added to timeline:
Scottish Football timeline
Major events in Scottish football in the 21st century with a...
Date:
Images:
![]()
