Wednesday, May 29, 2013

Fixing Sport


  The amount of attention devoted in the media to the Cricket fixing scandal is an indicator of the amount of interest in sport, among those who watch TV. This is just a fact.  I disagree with the Moralists who draw all kinds of high minded lessons from this about sociological bias. It is however time to turn ones attention to possible solutions for cleaning up sport.  A number of people have proposed legalising of betting. Others have pointed out that this will not cure the fixing problem per see.   The other problem is the existence of huge rents in the system.  Economic rents arise whenever there are natural or created monopolies - in this case the latter.  This attracts rent seekeers and politicans into the game. In our view piecemeal solutions are not the answer. An integrated view is required.  This has to be based on two important elements: Competition and transparency.

A New Sports Law

The foundation of a new Sports law, must be a distinction between a commercial and a non-profit organization with strict rules for distinguishing between public limited companies and societies.  Thus one would expect all cricket related organizations like IPL (national) or State level cricket organization to be required to be set up as Public Limited companies (for profit or non profit) , while a National/State "Gulli Danda Association" or "Village Cricket society" could be a societies.  The essential difference between a for profit and a non-profit company is that the latter cannot distribute profits to its shareholders.

The law must also specify rules for competitive practice by these public limited companies:  We have seen in earlier years, how exclusive contracts with players and advertisers were used to drive competitors from the market.  The law must be carefully frames keeping these unfair practices in mind, so that the Competition Commission of India can ensure competition in future.  These corporations, like all others would have to have transparent accounts fully audited by independent auditors.  They would also have to pay all taxes on their commercial earnings (advertising, stadium fees, branding activities).  They could however be allowed to seek tax exemption from the tax department on their donations to non-profit sports societies.

 Rules would have also be framed with respect to player contracts and player obligations with respect to non-cricketing activities and receipt of payments for not performing their contractual obligation to play well (i.e. fixing matches). The contract would be nullified in such a case and penalties should become applicable.

As part of the sports law, betting on sports could be legalized.  However, the same level of transparency and competition must be ensured in the betting business.  By definition, the betting company cannot be classified as a non-profit.  However, it could be a private limited or a public limited company. Again the rules for transparent accounting and auditing must be clearly specified and applied to companies that run the betting business.  These companies would of course be subject to Tax Deduction at Source (TDS) rules for deduction of taxes on bet winners.  Special reporting rules, with respect to lottery winners,  may also be needed to ensure that this channel is not used for money laundering.


These measures will not eliminate either fixing, black money or the politician-business nexus.  They will however help reduce its prevalence.  The reason is that as long as the rule of law is so pathetic and general governance is so poor more laws can only be a palliative.

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