Restraint of Trade a threat to NRL says lawyer

Is the NRL’s ‘Restraint of Trade’ Reasonable?

If you buy a café in Parramatta from someone else, then as a new business owner you don’t want them opening up a competing café right next door to you. More than likely they would take their established goodwill with them and deprive you of a real chance of making good with your new café.

This is why the law recognises that in some circumstances it is legitimate to impose a ‘restraint of trade’ upon someone. The general rule is that any conduct which results in a ‘restraint of trade’ is unlawful unless they are ‘reasonable’ – everyone has the right to make an honest quid. Reasonable means the restriction can’t be for a period that is too long, it can’t cover a huge geographic area and it can’t be too broad in scope. For example, going back to our café, any clause in the sale contract retraining the former owner from trading can’t say that the seller is not allowed to establish any food business anywhere in NSW for 10 years. That would be unreasonable on all three counts.

Well what about sports people? Do the same rules apply? Can a restraint of trade be imposed on them? The short answer is yes but for different reasons. In 1971 a case was decided by the High Court of Australia called Buckley v Tutty. It involved many of the same issues the NRL is facing now with Sonny Bill Williams.

Basically the High Court decided that yes footballers are involved in a trade despite the activity being a sport. Therefore they can’t be retrained from playing football unless the terms and reasons for the restraint were reasonable.

The first question then is what justifiable interests are being protected if Williams is prevented from playing Rugby in France? It’s not just about Williams and the NRL though, it’s about the sport and the competition as a whole – those are the considerations the judges will have to look at when determining reasonableness.

In similar cases in the past, judges have often considered the effects of allowing players to freely move from club to club on a competition and have understood the public support derived from a strong and evenly matched competition.

The second question and more problematic from a legal point of view is whether the restraint of trade is reasonable. It extends beyond the borders of an individual sport and indeed even crosses international borders. It is very unlikely that the bulldogs or the NRL will be able to prove that the restraint is reasonable in a legal sense.

The other issue that’s important here is the Trade Practices Act 1974 which is the main law regulating competition in the Australian market place. It makes ‘restrictive trade practices’ unlawful. Pretty much anything that hampers competition is disallowed by the Trade Practices Act. However, this doesn’t apply to contracts of employment, as for example, between Williams and the Bulldogs. But since there is no separate contract between Williams and the NRL, as would happen with the ARU if Williams was playing union, the source of the restriction is the NRL’s salary cap rules and as such the Trade Practices Act could be an important consideration in this controversy. We’ll have to wait and see.     

This won’t be the first case of a footballer going to court over an issue like this – just ask Terry Hill –  and it probably won’t be the last.

Andrew Dahdal, Associate Lecturer, Division of Law, Macquarie University.