Not only the marketing affairs, the Chinese Basketball Association also effectively controls all other critical aspects of the CBA under the CBA AOA. The following three issues illustrate how the Chinese Basketball Association greatly influences the operations of the CBA clubs.
By Wang Rui, Partner at King & Wood, William Gould, Alvin Attle, and Peter Gall
First of all, scrutiny and approval from the Chinese Basketball Association are prerequisites for a club to participate and remain in the CBA league. Even in the agreements concerning venue construction, player salary and transfer, marketing activities, profit allocation, the Chinese Basketball Association is a signature party.
Secondly, the Chinese Basketball Association may also exert influence on the clubs through a player registration system, providing itself additional leverage in influencing the use of players.
Lastly, the sports administration holds an equity stake in some clubs creating a further conflict of interest.
Ownership Problems in the CBA and Potential Solutions
Since the Chinese Basketball Association controls virtually all the significant aspects of the CBA league, the question becomes whether the Chinese Basketball Association is actually entitled to ownership rights. According to Article 39 of the PRC Property Law which specifies that “the owner of a real estate or chattel is entitled to posses, utilize, seek profits from and dispose of the real estate or chattel.” And as required by theChinese Basketball Association, furnishing all the elements required for operating in the CBA is the main prerequisite for admission. As such, the Chinese Basketball Association should give the rightful owners—the clubs more rights to manage and operate the league. Under the current financial arrangements relating to the league, the property rights of the clubs have been compromised to some extent in that they are not able to fully benefit from the league’s value, for which they provided the required resources.
Full freedom vested in the actual league owners may create effective entrepreneurial initiatives, form a more vigorous and regulated market, and eventually generate a more valuable product. The consequences of limiting the clubs’ freedom in relevant management and operational activities have become evident in the current Chinese basketball market. Investors do not have confidence in their ability to obtain returns on their investment and would have less incentive for further participation.
The Chinese sports administration system should be reformed and restructured to promote the free market. For example, the Chinese Basketball Association/CBMC should only regulate the relevant industry macroscopically, largely withdraw from the management and operation of the league, and concede direct control to the clubs. In this regard, clearly defined sports regulations and legal concepts should be introduced.