Setting Up Dates With Death?
In this short interview Horst Eidenmüller, Professor of Commercial Law, tells us about his recent paper published by Marquette Sports Law Review in 2019 - Setting Up Dates With Death? The Law and Economics of Extreme Sports Sponsoring in a Comparative Perspective.
- What was the problem that you were looking to address? What was the existing wisdom at the time?
I am interested in serious accidents or deaths of extreme sports athletes and in the role and potential responsibility of sponsors and the media in this context.
Every day, athletes die when practising extreme sports such as BASE jumping or free solo climbing. Most of these athletes are sponsored. Many are young and inexperienced, some are minors. Hence, “excess deaths” of extreme sports athletes are a serious societal problem.
Do the sponsors and the media push these athletes to take unreasonable risks? Specifically, are sponsors contractually incentivising athletes to take such risks, and does the media facilitate unreasonable risk-taking? Could the current contractual practice be improved? Should athletes be protected by mandatory rules in contract, tort or employment law?
Nobody had investigated these questions before.
- How did you make your argument?
The extreme sports sponsoring practice is secretive. I conducted more than 40 structured interviews with athletes about their sponsorship contracts in 2018. As a result, I was able to base my analyses on an up-to-date and unique account of the contract practice regarding extreme sports sponsoring worldwide.
I applied findings from cognitive psychology on risk-taking and from applied game theory and economics on negotiation management to assess this practice and suggested ways to improve it, including by way of mandatory rules in contract, tort and employment law.
- What was your argument?
The main findings of my research can be summarised as follows:
First, extreme sports sponsoring contracts are currently unbalanced. Risks and rewards are unbundled—while the athletes bear almost all the risks, the sponsor firms reap almost all of the rewards. Moreover, the available evidence suggests that the current practice incentivises athletes to take unreasonable risks, and, based on athletes’ preferences, there are ways to significantly increase the cooperative surplus compared to the status quo. In particular, sponsor firms could arrange for comprehensive health, disability and life insurance for the benefit of athletes and their families—at little cost to firms and with a significant positive effect on athletes’ welfare. Firms could establish systematic counselling, coaching and training programs for athletes, and they could move away from bonus-based compensation schemes.
Second, sponsor firms should face increased duties of care vis-à-vis young and/or inexperienced athletes. These athletes, in particular, are prone to “inefficient risk-taking”. Depending on the factual circumstances of the individual case, these duties may include enhanced counselling, coaching and safety training, as already mentioned. They may also require firms to refrain from subjecting young or inexperienced athletes to extremely high-powered financial incentives (bonus schemes) that encourage inappropriate risk-taking.
Third, sponsors also should face increased duties of care if they are involved in or influence the organisation of extreme sports events or control the premises/facilities on which such events take place.
Fourth, currently, sponsored athletes are treated by sponsors as independent contractors. Depending on the facts of each individual case and the applicable legal standard to delineate independent contractors from employees, this may or may not be correct. I suggest that courts should give more weight to economic (in)dependency as a relevant standard in addition to control exercised by sponsor firms when assessing whether a sponsored athlete is an employee. Further, even if an athlete cannot be characterised as an employee of a particular sponsor, the level of control exercised by that sponsor and the athlete’s economic dependency on it are factors that should weigh in on the sponsor’s duties of care under contract and/or tort law, creating a more finely tuned regulatory system than the dichotomy of independent contractor and employee suggests.
- Why is this research important?
My research is important because it addresses an important societal problem: unnecessary deaths of extreme sports athletes, especially of young and inexperienced athletes. For the first time, the interaction of athletes’ decision-making, contractual obligations of athletes vis-à-vis sponsors and the media has been systematically investigated, unearthing key insights into desirable changes regarding contracting practice and sensible forms of legal intervention by way of mandatory rules.
The results of the research demonstrate important limits to freedom of contract with respect to a particular type of commercial contract, i.e. sponsoring agreements. They suggest ways to improve the current contracting practice and introduce doctrinal tools to intervene with mandatory rules in contract, tort and employment law to protect athletes' interests. Media representatives should reconsider their current role as facilitators of unreasonable risk-taking by athletes and adjust routines and practices.
The insights of my research could be used to study (extreme) risk-taking in other areas, for example, risk-taking by corporate executives. The current practice of high-powered incentives in the form of stock options and similar contractual arrangements could incentivise unreasonable risk-taking and should be reconsidered.