The NBA Versus China Could Get Legal

In a battle of values versus money, the NBA took a hard stand recently by backing Houston Rockets GM Daryl Morey’s tweet in support of protesters in Hong Kong. In a press conference in Tokyo, NBA Commissioner Silver pointedly asserted that the NBA supports freedom of expression on political and social topics, even if it comes at the cost of growing the league’s business. To that end, Silver stressed “the long-held values of the NBA are to support freedom of expression, and certainly freedom of expression by members of the NBA community” and that Morey invoked this right.

Silver also released a written statement in which he noted, “[T]he NBA will not put itself in a position of regulating what players, employees and team owners say or will not say on these issues. We simply could not operate that way.”

While Silver’s remarks will likely temper U.S.-based criticisms for the NBA initially expressing regret that Morey may have “deeply offended” the league’s “friends and fans in China,” this clarified position has not been well-received in China. As explained below, it could lead to a substantial loss of business and litigation.

Silver’s explicit affirmation of the “freedom of expression” is an important development. He went beyond where NBA rules required him to go and did so at risk to his league.

The NBA’s financial dealings with China could lead to legal disputes. The NBA has clearly eyed China as worthy of considerable investment and time. According to Sports Illustrated, there are more people in China who watch NBA programming than there are people who reside in the United States. The NBA, in fact, is viewed as the “most popular” sports league in China. The league, which has offices in Beijing and Shanghai as well as offices in Hong Kong and Taipei, Taiwan, has entered into lucrative business partnerships with Chinese technology and media companies.

The NBA has reason to worry that these investments are jeopardized by the current controversy. This is true of the league’s $1.5 billion contract with Chinese tech giant Tencent, the NBA’s digital partner in China. The NBA’s contracts with Tencent are obviously private documents, but they likely include language that would authorize either side to exit the deal should certain conditions manifest. One possible condition is an action or omission by the NBA that Tencent interprets as a breach.

Whether Silver supporting Morey’s right to free speech qualifies as grounds for contractual breach would depend on the language in the contracts and business understandings between the league and Tencent. If Tencent tries to withdraw from its contractual obligations to the NBA, the company’s contracts with the NBA could become the source of potential litigation or arbitration.

CCTV’s statement also referenced that the state-owned company will “immediately investigate all cooperation and exchanges involving the NBA.” This “investigation” signals that CCTV is exploring how its relationship with the NBA could be reduced, if not terminated. It’s thus possible that CCTV’s actions could lead to a contractual dispute with the NBA.

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