Visa's tough stance on Fifa augurs more sponsor demands    

MAY 29, 20159:40 AM

[NEW YORK] Visa Inc's public warning to Fifa that it may end its sponsorship if world soccer's governing body does not quickly clean up its act will likely prompt other sponsors to take a tough stance as a major corruption scandal involving Fifa unfolds, brand experts said.

After U.S. prosecutors indicted nine FIFA officials and five sports media and promotions executives on federal corruption charges, other major sponsors including Coca-Cola Co, McDonald's Corp and Anheuser-Busch InBev urged FIFA to resolve its problems and repair its image.

But in the most forceful condemnation by a sponsor, Visa described its "disappointment and concern" with Fifa as "profound." "As a sponsor, we expect FIFA to take swift and immediate steps to address these issues within its organization. This starts with rebuilding a culture with strong ethical practices in order to restore the reputation of the game for fans everywhere," Visa said in a statement.

A company spokesman declined further comment.

Toby Southgate, chief executive of the Americas region at Brand Union, a subsidiary of British advertising company WPP, said Visa's action puts pressure on other companies to strengthen their responses, given the growing emphasis investors and consumers place on corporate citizenship.

"There are notions of good governance and transparency that the financial services category is very alert to," said Southgate. "It won't stop people from buying cans of Coke, but it will at a market level or an analyst level impact perception of organisations associated with corruption."

Normally, companies give entities they sponsor time to resolve issues, but the gravity and scope of the Fifa scandal may make this situation unique, experts said.

"The sponsors' patience has already been tested and continues to be tested," said Rob Prazmark, president of 21 Sports & Entertainment Marketing Group, a global sports and event sales agency in Greenwich, Connecticut, that represented Johnson & Johnson in its negotiations to become a World Cup sponsor in 2014. "That's where you may see a little bit more of an aggressive position out of Visa and some of the others." Visa conveyed a sense of urgency in its statement.

"Our sponsorship has always focused on supporting the teams, enabling a great fan experience, and inspiring communities to come together and celebrate the spirit of competition and personal achievement, and it is important that Fifa makes changes now, so that the focus remain on these going forward. Should Fifa fail to do so, we have informed them that we will reassess our sponsorship," the company said.

LOUDER VOICE FOR SPONSORS

Corporate sponsors have become more outspoken about issues such as labour conditions and environmental sustainability, both publicly and privately, said Nick Johnson, a partner at London-based law firm Osborne Clarke and board member of the European Sponsorship Association, which represents sponsors and rights holders.

Last week, for example, Adidas, Visa and Coca-Cola urged Fifa to take seriously reports of abuse of migrant workers in Qatar who are helping to build venues for the 2022 World Cup.

Such a position can also bring a public relations boost. "There is an element of perhaps opportunistic response on Visa's part here," Mr Johnson said. "But who can argue with their approach, really?" Pulling a sponsorship may not be easy given contractual commitments to Fifa. While it is common for such agreements to contain exit clauses over wrongdoing, they may have a high bar such as requiring a criminal conviction first, Mr Johnson said.

Otherwise, "these sponsors may well be in a position where if they wanted to break the contract early, there would be a hefty financial penalty for doing that," Mr Johnson said.

Still, companies have leverage over Fifa when it comes to renewing sponsorships, and the organisation relies heavily on such revenue to fund its activities.

About US$1.6 billion of Fifa's US$5.7 billion revenue for 2011 to 2014 came from marketing rights. And while World Cup sponsorships are usually in high demand, brand experts said Fifa would have a harder time replacing any canceled agreements as long as its reputation was in question.

REUTERS