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What Is The Fight Over Rule 40 and Why Should You Care?

Athletes are speaking out about the sponsorship injustices associated with competing at the Olympics.

The International Olympic Committee’s controversial non-sponsor marketing blackout period mandated by Rule 40 begins July 27 and lasts until Aug. 24. 

This summer, you’ll see lots of ads featuring Olympic athletes promoting shoes and watches and food and bags and credit cards and a whole host of other things. But if you pay close attention, you’ll notice something new: many of the ads leading up to and during the Games will never use the word “Olympics.”

Actually, they won’t use any of these words: Olympics, Rio, rings, summer, games, gold, or medal. And the phrase “Road to Rio” is entirely out of the question.

That’s because something new will happen for the first time this summer: there will be advertising of Olympic athletes during the Olympic Games from companies that are not official Olympic sponsors. And those new ads are coming with a bunch of rules.

“It’s opening up a whole new level of opportunity,” says Jon Mason, the associate director of communications for the U.S. Olympic Committee (USOC).

Historically, there has been a blackout period for five weeks around any Olympics, during which athletes cannot appear in ads—except for companies who have paid to be official Olympic sponsors. Worldwide partners, like McDonald’s and Coca-Cola, pay about $100 million apiece for this exclusive right, with smaller companies paying anywhere from $20 million to $60 million for lesser rights.

What the blackout period meant was that swimmer Michael Phelps was not allowed to appear in any Under Armour ad or promote Under Armour in any way during the London Games, or he risked being kicked out of the competition. (In fact, Phelps briefly got in trouble when a not-yet-released ad for Louis Vuitton was leaked during the blackout period.)

The effect of that blackout period on athletes has meant that when their value is the highest—during the Olympic Games—they could not cash in on it, nor could they compete on the open market for the highest price for their abilities. Athletes’ frustration with this state of affairs reached new heights in London in response to restrictions around what they were allowed to say online or on social media. Athletes like Lashinda Demus, Sanya Richards-Ross and Nick Symmonds posted pictures of themselves with tape over their mouths or tagged posts #WeDemandChange.

Last summer, the rule that governs that blackout period—Rule 40—was revised by the International Olympic Committee. “It’s positive that they listened,” says Demus, on the up side.

But there are still a few problems.

“It’s not really better,” Demus argues. She sees issues with how the rule was revised and how it’ll be implemented. Companies that want to run ads during the blackout period had to submit a waiver in January with all their planned marketing materials, including which athletes they want to promote. But most athletes hadn’t even made the team by January, she pointed out, so how could companies know who to market? The advertising also had to start running in March and has to run (in some form) continuously through August, so as to not unfairly capitalize on the three weeks of the Olympics. That application submitted in January also had to include all aspects of all campaigns so that it could be approved by the USOC—even social media campaigns, like Facebook posts and tweets. And those ad materials can’t use any Olympic-specific intellectual property, ie. pictures of the rings, or words like “medal” or “summer” in a context that implies the Olympics.

“I think it’s a massive joke,” says Symmonds, citing the same concerns.

Brooks, Symmonds’ primary sponsor, did initially put in for a waiver, but ultimately decided not to pursue it because it didn’t have all the advertising materials finished by then, and didn’t have the money or time to complete them in time. Symmonds is also sponsored by a company he started, Run Gum.

“Run Gum certainly can’t afford to do that,” he says of the waiver application process.

Sally Bergesen, founder of the women’s apparel brand Oiselle, has been outspoken in her criticism of Rule 40 and of the restrictions limiting athletes’ sponsors. Because Oiselle is a small company, sponsorship of its 32 elite athletes is a “significant part of our budget,” explains Bergesen. For a bigger company, like Under Armour, going through the waiver process might not have been as debilitating, just a line item on the budget, she says. Bergesen ultimately did not pursue the waiver to get her proposed advertising campaigns approved. “We just don’t think it’s worth it,” she admits.

Without an approved campaign and waiver under the new Rule 40, Oiselle is still subject to the blackout period and cannot promote any of its athletes, even those who might make the Olympic team, like Kara Goucher. During the Games, then, “there’s zero visibility for us and there’s zero visibility for our Olympic athletes to talk about us,” she says. She argues that the limitations on social media even prevent her from tweeting about the Games or posting something like, “Go get ‘em Kara!”

Bergesen is right that if her tweet was construed as an ad, similar to a congratulatory ad on TV, then Oiselle could face a request to cease-and-desist. But it all depends on the context in which words like “summer” or “effort” or “go for the gold” are used on social media. If they’re used to profit by implying a connection to Olympics or Olympic athletes, then that’s not allowed, Mason says.

Companies like Under Armour and Gatorade, though, are eagerly taking advantage of the new rules and expanded opportunities for advertising. “We’re extremely excited and supportive,” says Peter Murray, Under Armour’s vice president of global brand and sports marketing. He said he has no complaints about the approval process and understands that the IOC and USOC need to protect their intellectual property.

If you’ve seen the Under Armour Michael Phelps video that was released online in March, then you’ve seen one of the pieces of their planned months-long Olympic campaign. In the ad, neither the Olympics nor Rio are ever mentioned. Instead, flashing lights from photographers imply the media craziness Phelps faces. As he swims, music plays with lyrics about “the last goodbye.” Even without mentioning “medals” or “summer,” you get the idea.

Now, instead of having to stop that ad at the end of July, Under Armour can fully capitalize on its sponsorship of Phelps. It will be able to continue to promote him and the 250 other athletes it supports, all summer, when people are paying the most attention.

Mason says this is the point of the revised rules: for athletes with ongoing sponsorships to be able to take advantage of them. The USOC approval process, he said, is supposed to be a collaborative effort, so that everyone ends up with a product they’re happy with—and nearly all of the ads that were submitted, and that companies chose to continue pursuing, were approved on the first or second attempt.

Mason also points out that some of the issues companies are facing with the waiver process are the same issues Olympic partners sponsors face. No one knows who will make the Olympic team, yet ads have to be prepared anyway. “It’s part of the challenge of Olympic advertising,” he says.

In the U.S., the Ted Stevens Amateur Sports Act of 1978 gives the USOC sole copyright to the word “Olympics” and its accompanying intellectual property. That is the law that gives the USOC the right to ban words like “summer” or “effort” from ads. To be clear, though, those words are “absolutely fair use” outside of the context of the Olympics, explains Frank Ryan, a lawyer for DLA Piper who has worked on sponsorship and media deals for the IOC, national governing bodies, and corporate sponsors. It’s only when you’re using those words to imply a commercial association to the Olympics that doesn’t actually exist, “trying to benefit off the goodwill of the Games,” he says, that you run the risk of violating intellectual property rights.

The rights to Olympic intellectual property are used to raise money to fund the USOC, whose annual budget during the last summer Olympic year was $247 million. It costs about $40,000/athlete, said Mason, to send competitors to the Olympics—once you count apparel, coaching staff, trainers, and equipment.

Yes, he understands that it’s hard to make a living as an athlete. And the more sponsors there are in the space the better it is for everyone. “But, at the same time, it costs a great deal to take a team to the Games,” he says.

Theoretically, if Olympic partners like McDonald’s and Coca-Cola pay big bucks for exclusive rights to advertise, the lack of exclusivity now will make it easier for them to negotiate cheaper rates, and decrease the amount of money the USOC gets.

“Top-level sponsors are not exactly thrilled about the question of competition during the Games,” says Ryan. But it’s not all about them either. There’s also a desire to attract a wider range of sponsors into the space, he said, and athletes increasingly need to build their own personal brands. To keep Olympic sports healthy, change was necessary.

And, anyway, no one knows exactly what’s going to happen in Brazil.

“We don’t know yet,” says Ryan. “We’ll see how things play out this year.”

“With this being the first year of Rule 40, there will undoubtedly be a learning curve for all involved,” says Tina Davis, the managing director of global sponsorships for Citigroup, which is an Olympic sponsor. She also said that Citi is primarily focused on its own marketing plans, not on the impacts of the new rules.

Athletes who make the team sign a contract that comes with very explicit instructions about what they are allowed to do. There are even social media and blogging instructions—“diary-like” accountings of your days in Rio are OK; promoting sponsors who are not Olympic partners is not.

It doesn’t take a lot of imagination to see how there’s some gray area in those guidelines. And it is widely acknowledged that the social media aspects are the part of the rules that face the most ongoing questions.

What if your diary-like account of your day includes a picture of you in your non-Olympic partner sponsor gear? (You are absolutely allowed to wear that gear outside of competition and team events.) What if you’re sponsored by Strava and want to post your workouts to Strava? At the 2012 Olympics, Symmonds, who was then sponsored by Nike, posted a picture of himself standing in front of a hedge that had been cut in the shape of a Nike shoe and swoosh. He tweeted: “Spent the day at my fav sponsor’s hospitality. Won’t name them so as not to violate #Rule40. Also, interesting shrub.”

Do not expect him to be quieter this time around. “If I make the team, I fully intend to push the envelope,” admits Symmonds, a two-time Olympian and the 2013 World Championship 800m silver medalist. “I have a responsibility to Brooks to let people know who got me on the Olympic team. And it wasn’t any of the Olympic [sponsor company] partners.”

“There are all kinds of ways to do ambush marketing,” says Bergesen. You can create events or hashtags that are not explicitly about the Olympics. You can post peripherally about related topics, and make the implication clear. The danger, though, is that you face a possible cease-and-desist letter, and, ultimately, a suit seeking damages—though that has never happened and the USOC has never been challenged in court over these rights. (Oiselle has, however, received letters before informing the company of its infringement on Olympic copyrights. For example, a video Oiselle made promoting its athletes at the Olympic Marathon Trials used a Team USA logo. The company had to take down the video, remove the offending image, and then could repost it.)

The danger is bigger for athletes at the Olympics, who could theoretically be kicked out, although the odds of that are low in the modern-day Olympics.

“I would be honored to be kicked out of the Olympic Village for Rule 40 violations,” says Symmonds, but he thinks athletes could find power in numbers. “If you have 10,500 athletes not following Rule 40, I’d like to see you kick them all out.”

It’s a fair point, given that even the USOC has acknowledged it doesn’t really have an enforcement division and certainly doesn’t have the staff or funding for around-the-clock enforcement on all social media channels during the intense Olympic period. It’s impossible to imagine anyone effectively monitoring all athletes’ Snapchat and Periscope and YouTube channels.

You can be sure, though, that they’ll be watching Symmonds.

There is an ongoing debate in the Olympic athlete community, and particularly in the track and field world, about who should be making money and how and what rights athletes have. Symmonds has, very prominently, cast himself as the leader of that movement, and his company is currently in the middle of a lawsuit with USA Track and Field over whether non-endemic sponsors (ie. companies that aren’t running apparel or shoe companies) can display their logos on athlete’s singlets. Symmonds also recently auctioned off a spot on his arm for a temporary tattoo. He got $21,800, even though the tattoo will have to be covered up during the Olympic Trials and during any competitions in Rio.

(One can only presume that if every athlete did this, the supply would more than meet demand, driving down prices. But for now he made a very profitable point.)

RELATED: T-Mobile CEO Buys Advertising Space on Nick Symmonds’ Shoulder

In 2015, Symmonds didn’t sign the required athlete contract for the World Championship and was not allowed to race. He said the refusal to sign was over concerns about how the contract implicitly and explicitly banned him from wearing his sponsors’ gear. However, he’s fairly certain he plans to sign the contract required of U.S. Olympic athletes.

“It may be more powerful to sign under protest,” he says. And then stir things up once he’s there.

But most athletes, says Demus, are not going to risk speaking out or causing problems. They’d rather just train and focus on this once-every-four-year opportunity to get as much media attention and sponsorship money as they can.

A 2012 Olympic silver medalist in the 400m hurdlers, Demus currently has no sponsors and is struggling to make ends meet as she prepares for Rio. She’d like to see the companies that sponsor the USOC and IOC instead sponsor athletes directly. “We’re the only ones not in that partnership,” she says.

Both Symmonds and Demus believe the athletes should be making money for competing in the Olympics, especially since there’s money being made by everyone else. NBC paid $1.23 billion to broadcast the 2016 Olympics, and that means they own the rights to all the U.S. footage of all those athletes competing.

“Money is being made hand over fist by the people who own the rights to the Olympics,” says Bergesen. “None of it goes to the athletes.”

That’s not exactly true. USA Track and Field now pays $10,000 to each athlete who makes the Olympic team—a recent development—and the USOC pays bonuses of $10,000, $15,000 and $25,000 for bronze, silver, or gold.

Non-track athletes, though, aren’t necessarily guaranteed money just for making the team. And the medal bonuses are small when compared with countries where athletes are fully funded by the government. In Sochi, Russia reportedly paid $114,000 for a gold and Kazakhstan promised a $250,000 gold medal bonus.

These countries, though, don’t necessarily even have to worry as much about the implications of Rule 40. While the rules apply to every country governed by the IOC, in practice not all countries face equal sponsorship or copyright issues. That’s because plenty of places simply put their athletes in government-funded programs, which means those athletes never need to get their own sponsors or make their own advertising deals.

That’s not how it works in the U.S.

Symmonds says he understands the amateur roots of the Olympics and would be happy to compete for free, just for the honor of representing his country, “if they all do their jobs for free as well.”

Instead, he thinks the new rules don’t go far enough. He wants to see a 50-percent revenue share model with the athletes, who he argues are doing at least as much and as important work as the advertising companies, organizing officials, broadcasters. The athletes just aren’t (generally speaking) making as much money.

“I know Olympic medalists who live below the poverty line,” he says.