What Should Sportswear Businesses Look Out for in Sponsorship Agreements?

You can broaden your sportswear brand’s reach by sponsoring athletes. This strategy can help promote your products through sporting competitions, public events and social media. However, you may want a formal sportswear business sponsorship agreement to ensure some level of control over your sponsees and guarantee that you benefit from the arrangement. 

You can achieve this by forming a legally binding document to outline the relationship between your brand and sponsored athletes. This article will outline some key issues you should consider in your sportswear business sponsorship agreement.

Agreement Term and Fees

You need to decide what value you will offer your sponsored athlete in exchange for promoting your sportswear brand. One of the most important things to consider is the term of the sponsorship. You should determine whether you will pay the athlete or celebrity:

• for every game or competition in which they participate; 
• in installments of payments over a period of time;
• in one lump sum at the end of a fixed period.

You should also be aware that you may be required to pay superannuation. This will depend on whether your sponsee is:

• an independent contractor under the Australian Government test; or
• an employee or contractor for tax purposes.

You are still required to pay superannuation to contractors if they meet specific requirements, unless the total remuneration is less than $450 per month.

Sponsorship Conditions

You may choose to place conditions on the athlete so that they appropriately represent your business. This could include requiring that they:

• do not wear and promote the apparel of your competitors;
• participate in a certain number of competitions or games;
• meet specific performance standards;
• maintain a certain level of followers on social media; and
• post an image of your products a certain number of times each week.

Your agreement should mandate any consequences that apply should the sponsee violate any of these requirements.

Sponsorship Benefits 

You will have to think about what perks you will provide to the athlete or celebrity you choose to sponsor. This generally involves providing them with:

• clothing;
• accessories; or
• sporting equipment.

You may also want to reimburse your athletes for entering certain competitions that could offer your brand valuable promotion possibilities.

Control Over Social Media Content 

The control you have over the athlete will generally depend on the size of your brand. If you are a larger brand, you may want stricter control to ensure that you maintain your public image. This could include: 

• guidelines as to what they post;
• control over the time they post; and 
• the ability to review what posts they are making. 

Smaller brands can still impose guidelines, but it may depend on the manpower of the team and whether they have capacity to monitor the athlete’s content.

Use of Your Brand Name

You will have provisions in the agreement surrounding intellectual property (IP). This will concern how the athlete can represent your brand. You can license your brand to the athlete so that they can use your logos and branding under certain guidelines. To protect your image, you should:

• clearly outline who owns the IP;
• specify the rights to use your brand name and logo;
• mandate how and when to position your logo on their images.

Goods at the End of Sponsorship Agreement

If your business provides substantial equipment to the athlete as part of your sponsorship agreement, you may want to request that they return it when the arrangement comes to an end. 

Termination

You should clearly outline how you can terminate the sponsorship agreement. This will be useful if the sponsee fails to meet their obligations and a dispute arises. You may want to specify that you may terminate the contract if the athlete:

• behaves in a way that could damage your brand image;
• drops below a certain amount of followers on social media; or
• has not achieved the relevant performance standard and is now playing for a lower division.

There can often be disputes concerning payment to the sponsee or the services provided by each party. It is vital to have a dispute resolution procedure in place to assist both parties if an issue arises.

Other Considerations

Australian law prohibits deceptive advertising under the Australian Consumer Law (ACL). The ACL stipulates that a person, individual or corporation cannot engage in conduct that misleads or deceives consumers. It must be clear to consumers that your brand has sponsored the athlete promoting your brand.

The ACL can consider sponsored posts or influencer marketing misleading under its provisions if the sponsee or influencer does not disclose that they are receiving remuneration.

Therefore, it is best practice to:

• avoid representing sponsees as ordinary consumers of your products;
• clearly disclose that you have paid the athlete to promote your products;
• advise the sponsee in writing of their responsibility to share their commercial connection with your brand when posting on social media or appearing in public.

Key Takeaways

There are many things to consider when drafting a sportswear business sponsorship agreement to ensure that your brand benefits from the arrangement. Importantly, you should outline the athlete’s specific obligations to promote your brand over a scheduled timeframe. This should include precise conditions relating to their athletic performance, social media activity and behaviour. In turn, you should detail exactly how and when you will pay the athlete and any clothing or equipment you will provide. Having a clear and comprehensive agreement will assist both sides in understanding their obligations and help to avoid disputes. If you would like assistance drafting or reviewing your sponsorship agreement, contact LegalVision’s contract lawyers today on 1300 544 755 or fill out the form on this page.