Matching Clause: An Unexpected Result For Sportswear Manufacturer, New Balance

Similar to the case between Rangers FC and Sports Direct which we covered last year, the recent case between sportswear manufacturer, New Balance, and Premier League football club, Liverpool FC, shows yet again the importance of drafting a clear matching clause.

A well drafted matching clause is a useful commercial term, providing a supplier with the opportunity to stay ahead of the game and extend (or at least renegotiate) its existing agreement with a customer by offering the same terms as its competitors.

Unlike the Rangers and Sports Direct case, it was the football club that came out on top this time, with the High Court dismissing New Balance's claim that it had the right to renew its kit supplier agreement with Liverpool FC, as it concluded that New Balance had not matched the offer of a rival sportswear manufacturer in all material ways.

What happened?

US sportswear brand and Liverpool FC's current kit supplier, New Balance Athletics, Inc. ("New Balance") commenced legal proceedings against The Liverpool Football Club and Athletic Grounds Limited ("Liverpool FC") to prevent the European Champions from signing a merchandise sponsorship deal with competing brand Nike, once New Balance's deal expires in May 2020.

The dispute concerned New Balance's argument that Liverpool FC failed to honour the agreed term (the matching clause) in the kit supplier agreement between the two which gave New Balance the option to renew its kit supplier agreement with Liverpool FC by matching any competing offers.

The key question for the High Court was whether the terms of New Balance's counter offer were less favourable to Liverpool FC than the "the material, measurable and matchable terms" of Nike's offer, which was favoured by the football club.

The High Court dismissed the case, ruling that Liverpool FC was not bound by New Balance's counter offer and could enter into the agreement with Nike on the basis that the two competing offers were not materially alike. The offers were distinguished on the basis of the superior marketing reach that Nike could make available to Liverpool FC. In particular, Nike's commitment to promoting Liverpool FC merchandise and products through endorsement deals with "global superstar athletes" and celebrities "of the calibre of LeBron James, Serena Williams, Drake etc" was crucially omitted from the New Balance offer.

What to consider when...