U.S. Markets closed

Bizarre rule allows Michael Phelps to market his brand while other Olympians can't

If you’ve watched any of the men’s swimming events at the Summer Olympics in Rio this week, you’ve likely noticed that Michael Phelps wears a swimming cap with a bold-type logo front and center that isn’t on any other swimmer’s cap: an MP, his initials. It is the logo of his own brand, licensed to the California swim gear company Aqua Sphere, and Phelps is permitted to show it off. But athletes in many of the other sports can do no such thing.

It’s all part of Rule 40, the U.S. Olympic Committee’s marketing restrictions that limit non-official sponsors from doing much of anything during a blackout period that begins nine days before the opening ceremony and ends three days after the closing ceremony. During the blackout, a brand like Under Armour, which sponsors Phelps and other Olympians but is not an official Olympic sponsor, cannot overtly reference the Olympics in any of its advertising or on its official social media. (Under Armour took smart advantage of this condition with a new ad it began running in March that shows Phelps training in the pool, but never mentions the Olympics.)

For the athletes, it’s a little different. They can’t mention their non-Olympic sponsors on their own social media in the same post in which they mention the Olympics, but at the Olympics, some of them can sport gear from the brand. Swimmers can. Golfers can, with an exception if one company has paid to be the exclusive sponsor of one country, like New Balance did with the Irish golf team. Track & field athletes cannot. That’s because Nike is an official Olympics “supplier” this year (it is not an official Olympic sponsor), so it gets exclusive uniform rights to Team USA track & field. (But not swimming.)

Michael Phelps’ own logo on display, for the world to see.

That seemingly arbitrary part of the rule enrages sports apparel executives like Sally Bergesen, CEO of Seattle-based women’s athletic apparel brand Oiselle. Before the blackout period even began, on July 4, when the American middle-distance runner Kate Grace won the women’s 800-meter Olympic trials, Oiselle, which sponsors her, congratulated her on Instagram by saying, “She’s heading to Rio!” The USOC sent a warning letter, demanding Oiselle take down the post and “completely refrain from creating Olympic-themed advertising.”

Bergesen and others would like to see changes to Rule 40. Specifically, Bergesen argues, runners ought to be able to show a sponsor logo on their uniform, just like swimmers can. “Clearly there’s been a path that’s been defined for an Olympian like Michael Phelps, and potentially others, where they can give visibility to a business entity that benefits them, that actually helps them make income,” Bergesen tells Yahoo Finance. “And what you see in track & field is that’s actually not possible at all. Athletes should be able to have a primary sponsor logo on the national team uniform very much like Michael Phelps was able to do with his swim cap.”

The USOC has argued that if it relaxed its rules too much, those brands that have paid upwards of $200 million to be official sponsors might be less interested, and the USOC would lose revenue.

Many have criticized Rule 40 for being far too harsh, but the USOC has special heightened trademark protection from Congress that allows it to set such aggressive rules.

The complicated, often confusing differences in the sponsor rules can have fascinating effects when it comes down to the actual Olympic events. On Tuesday night, Phelps was about to swim in the 4×200 freestyle relay when his own cap snapped in half as he pulled it on. He had to borrow a cap from American teammate Conor Dwyer—but Dwyer is sponsored by Speedo. Phelps left Speedo after the 2012 Summer Games in London, and has been with Aqua Sphere since. Dwyer knowingly turned the cap inside out for Phelps.

In other words, even the athletes are super-aware of the marketing rules. And many critics of the USOC point out that they shouldn’t have to be.