In our recent sponsorship article – ‘Navigating Tensions between Athlete Ideals and Corporate Partnerships’, we discussed rising tensions within the Australian sports industry between athletes’ ideals and corporate partnerships, and what stakeholders in the sports industry can do to ensure they get the best out of their partnerships.
Sports sponsorship is crucial for all industry stakeholders and can be particularly valuable for corporate sponsors. It is recognised as one of the best marketing strategies employed by many of the world’s biggest companies and brands.
An athlete increasing your brand’s awareness can be incredibly valuable. However, an athlete can be equally damaging to your brand if they behave in a way that attracts public scrutiny or does not align with the brand’s values.
With the rise of social media, the details of athletes’ private lives have never been more accessible to the public. In everything your sponsored athlete does and posts, your brand gains exposure. However, exposure isn’t always positive. To best protect against negative exposure, you should ensure your sponsorship agreements contain morality clauses.
What is a morality clause?
A morality clause provides sponsors with the ability to terminate an agreement if an athlete engages in conduct that brings themselves, the team, the brand or the league into disrepute. Examples of such conduct might include publicly criticising a sponsor, openly endorsing a competitor’s brand, or engaging in offensive or criminal behaviour.
Morality clauses can address specific types of conduct or a range of conduct. From the sponsor’s perspective, it’s beneficial for clauses to be as broad as possible.
Why are morality clauses important?
To best protect your brand and dissociate it with a poorly behaving athlete quickly, to minimise potential damage, it is important that you are able to terminate your sponsorship agreements without notice and without penalty if things go astray.
Some other steps we would take for added protection to your brand might include:
Depending on the type of product you’re offering, you may need to consider whether your agreement needs to restrict the athlete from using the products or services of a competing brand in public. You should also consider whether such restriction should extend to their team and/or team members and if there should be additional contracts in place.
Be cautious entering into any agreements that require you to pay the athlete up front and in full. Making periodic payments throughout the term of your Sponsorship Agreement means that if your relationship with the athlete breaks down, or if the athlete engages in harmful conduct to you or your brand in breach of the agreement, you won’t need to pay the full sponsorship amount. You should also consider claw back provisions, which will allow you to reclaim the fees that you have paid to the athlete if the agreement is terminated due to poor behaviour.
Do you have questions about your sponsorship agreements? The KKI Sports Law team can help.