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Is the NBA Headed for a Legal Battle With China?

Is the NBA Headed for a Legal Battle With China?
By Richard Dahl on October 17, 2019

The National Basketball Association enjoys a reputation as America's most "woke" professional sports league. In contrast to the National Football League, where Colin Kaepernick has apparently been blackballed for kneeling during a National Anthem, NBA star players and coaches regularly speak out in favor of Black Lives Matter and gun control, for instance.

But that reputation is teetering now that the league is weighing its idealism against the lure of billions of dollars from China.

The NBA has become hugely popular in the People's Republic, where the game's fan base is reportedly larger than in the U.S. To meet that demand, the NBA has entered a number of business partnerships with Chinese media and technology companies. One of the biggest — a recently signed five-year, $1.5-billion pact —is with Tencent, a huge tech company that streams full seasons of NBA games to hundreds of millions of viewers.

With one single tweet from an NBA general manager on Oct. 4, however, the golden future in China grew markedly dimmer. On that day, Houston Rockets general manager Daryl Morey tweeted, "Fight for Freedom. Stand With Hong Kong."

China Strikes Back

Morey quickly learned that NBA-style free expression can exact a price when it comes to China and how it deals with the pro-democracy protesters in Hong Kong. Although he took down the tweet shortly thereafter, it was too late to avoid the damage. His message went viral. Chinese state television and Tencent both announced they would stop broadcasting and streaming NBA games.

The NBA then responded with an apology of sorts from spokesman Michael Bass: "We recognize that the views expressed by Houston Rockets General Manager Daryl Morey have deeply offended many of our friends and fans in China, which is regrettable."

But that was just the beginning.

After Rockets owner Tilman Fertitta sided with the NBA in attempting to isolate Morey, it was time for politicians from both sides of the political aisle to step into the fray and accuse the league and the Rockets of backing down to a Communist country.

This prompted the NBA to weigh in again, this time swinging in the opposite direction. "(T)he long-held values of the NBA are to support freedom of expression" by everyone in the league, including Morey, said NBA commissioner Adam Silver.

Which prompted more criticism from China. And so the back and forth has continued, heavily influenced by politics and national pride in both countries. Meanwhile, the cold language of contract law — and the interpretation thereof — may also play a big role in how the differences are resolved.

How Might Contracts Be Interpreted?

In Sports Illustrated, attorney and law professor Michael McCann suggests that in the Tencent deal, for instance, there is likely language that either side could exit it if certain conditions arise.

"One possible condition is an action or omission by the NBA that Tencent interprets as a breach," he wrote. "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 deal with the NBA, litigation could ensue. McCann points out, however, that it's often difficult for American companies to sue Chinese companies in the U.S. because of uncertainty about whether a civil judgment would be enforced in China.

Clearly, however, the Chinese love their basketball as much as they feel obligated to support their government. Tencent stepped back and said it would stream preseason games in pictures and text only until the beginning of the regular season in late October. Then, unannounced, Tencent streamed two preseason games on Oct. 14.

Speaking to reporters that day, Beijing's foreign affairs spokesman, Geng Shuang, said, "Exchanges in sports have always played an important role in promoting China-U.S. exchanges and friendship, but like we stated earlier, be it in China or the U.S., mutual respect is a prerequisite for conducting exchange and cooperation."

If peace is truly restored, the NBA may have learned a hard lesson: Sometimes free expression has its limits.

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