After a dispute over DFL investors: 50+1 rule under pressure

Martin Kind’s role at Hannover 96 brings a completely different topic to the surface after the failure of investors to get involved with the DFL: 50+1 is in danger.

The Federal Cartel Office continues to monitor the 50+1 rule. In Hanover, the dispute is boiling over the question of who is really in charge and the DFL is under pressure because it has to enforce the rule – otherwise there is a risk of new conflicts with the fan scenes.

What’s the point? Federal Cartel Office to do with the 50+1 rule?

In 2018, the German Football League (DFL), under former president Reinhard Rauball and then managing director Christian Seifert, asked the Federal Cartel Office to examine whether the rule was compatible with competition law.

The office divided 2021 into one preliminary assessment with: The 50+1 rule is compatible with antitrust law, but the exceptions to the rule are not. These exceptions currently apply to Bayer 04 Leverkusen and VfL Wolfsburg, which are wholly owned by the Bayer Group and the Volkswagen Group respectively.

There was also an exception for TSG Hoffenheim. Patron Dietmar Hopp has since given his majority of voting rights back to the registered association (e. V.).

A kind of luxury tax as a compromise

The DFL proposed a compromise to the Federal Cartel Office in response to the preliminary assessment. This said that the two clubs exempt from the rule would have to pay a kind of luxury tax if their parent companies compensated too much loss. However, 7.5 percent of the respective club’s total turnover is considered an allowance. With a turnover of 200 million euros, that would be at least 15 million euros. Only when the corporations make compensation payments in excess of this allowance does the “luxury tax” become due, the amount of which is then calculated according to a specific interest rate key. Currently that would be 50,000 euros per million euros in loss compensation. The compromise proposal also states that a committee position will be created for club representatives.

With this solution, the two clubs would have had existing protection and the other clubs would have had legal certainty at least from the cartel office. This compromise was also supported by the Federal Cartel Office, but has not yet been finally decided.

Why hasn’t the compromise been agreed yet?

First, there was an application for bias from 1860 Munich, which dragged out the review process. Then there were several rulings by the European Court of Justice relating to sports, for example on the Super League. These should also be taken into account in terms of content.

And then came the vote on investor entry into the DFL. The suspicion remained that Martin Kind, as managing director of Hannover 96, was acting contrary to the instructions of the parent club Hannover 96 e. V. voted “yes”. Kind has not yet made public how he voted.

This is an opportunity for the Federal Cartel Office to look at the situation in Hanover with a view to the 50+1 rule. The competition authorities announced in a letter to those involved in the review process that “To familiarize yourself with the latest developments regarding the DFL’s application of the 50+1 rule and then discuss how to proceed”. The letter is available to the sports show. The handling of the rule can “Allow conclusions to be drawn as to whether the DFL pursues the goals of the rule consistently and consistently”the cartel office continued.

When asked, the DFL stated that it considered it understandable that the Federal Cartel Office was considering the vote on investor entry “considered the application of the 50+1 rule”. Nevertheless, the DFL hopes that the process will be concluded this season based on the compromise advocated by the office. The DFL comes to the conclusion: “There are no signs of a fundamental change in this assessment by the Federal Cartel Office.”

What’s the problem with Hannover 96?

In 2017, Martin Kind applied for an exception to the 50+1 rule, as it now applies to Leverkusen and Wolfsburg. Criteria for obtaining an exception have been one for more than 20 years “uninterrupted” and “significant” Promoting the club. The DFL rejected the exemption because it did not see the “significant” funding as a given.

In 2019, the capital side of the club, represented by Kind, concluded a contract with the parent club of Hannover 96, the so-called “Hannover 96 contract”. A crucial regulation in it: The supervisory board of Hannover 96 GmbH & Co. KGaA (limited partnership on shares) decides on the possible dismissal of managing director Martin Kind.

However, the capital side has two members in the four-member committee and can therefore always create a stalemate, meaning that Child cannot be removed against his will – which he emphasized in 2019 at a press conference for the signing of the contract.

This means that the parent club theoretically has the right to issue instructions to the management as required by the DFL. In practice, however, this right to issue instructions is hardly enforceable because, due to the distribution of voting shares, the managing director cannot be removed by the parent association if the right to issue instructions is violated.

The parent association lists numerous violations of instructions by the child

The parent association pointed out numerous violations of instructions and wanted to remove the child. Child initially sued successfully. Ultimately, however, the Federal Court of Justice at least allowed the revision of the judgment requested by the parent club.

Kind repeatedly emphasized that, in his opinion, the contract at Hannover 96 complied with the 50+1 rule. The parent club, which once signed the contract, also accuses the DFL of not intervening: “By consciously inaction regarding compliance with the 50+1 rule stipulated in its own statutes (…), the DFL itself is endangering the existence of the 50+1 rule.”

What does the DFL say about this?

At the request of Sportschau, the DFL rejected the allegations made by Hannover 96’s parent club. The league association announced that the 96 contract raised the question of the scope of the right to give instructions “Apparently the rules between both parties are not free of interpretation”.

In 2022 the DFL wrote: “It is crucial for compliance with the 50+1 rule under the specific circumstances in Hanover that a managing director (…) is subject to the instructions of the shareholders’ meeting of Hannover 96 Management GmbH, whose shares are held solely by Hannover 96 e. V and that lawful instructions are also observed and fulfilled.” If that is not the case, the DFL will check the compatibility of the construction in Hanover with the 50+1 rule “recheck”. Hannover 96 has always received the license for the 2nd Bundesliga since 2019.

DFL leaders are waiting for the decision Federal Cartel Office

According to information from the Sportschau, the situation in Hanover has not been addressed further by the DFL leadership since 2019 because they initially wanted to wait for the proceedings at the Federal Cartel Office to be completed. This strategy of restraint did not work – parts of the DFL presidium are now calling for clearer action regarding the situation in Hanover.

Meanwhile, Kind apparently sees an opportunity to redesign the rules. “The DFL must have the courage to redefine: In which questions can the eV have a say and in which not? In which questions is capital allowed to have a say and in which it is not?”he said in an interview with the Süddeutsche Zeitung. “The DFL could create future-oriented solutions without having to give up 50+1.”

What are the consequences of 50+1?

The rule is in danger on several levels. If the Federal Cartel Office comes to the conclusion that the DFL is not consistently enforcing the rule apart from the exceptions in Leverkusen and Wolfsburg, antitrust concerns could play a role.

If child legally defends himself against intervention by the DFL, the rule could, conversely, be questioned in court. For the active fan scene, however, a softening or even abolition of the 50+1 rule is an immovable red line.