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Racy photo may get Michael Phelps in hot water

Louis Vuitton

This advertising image of Michael Phelps, shot by famed photographer Annie Leibovitz, leaked out early in violation of an Olympic regulation known as Rule 40.

The mysterious release of a photo of Michael Phelps in a bathtub, shot for a Louis Vuitton ad campaign, threatens to cause a splash of a different kind. Everyone involved in creating the photo denies having released it early, perhaps because it may put Phelps in hot water with the International Olympic Committee.

A new IOC regulation, called Rule 40, prohibits athletes from appearing in ads for non-Olympic sponsors from July 18 to Aug. 15. According to the IOC’s 19 page explainer, Rule 40 is designed to prevent ambush marketing, defined as non-Olympic sponsors trying to associate themselves with the Olympic brand.

Yet two photos of the Olympic swimmer, shot by the photographer Annie Leibovitz, began circulating during the time period in which athletes are prohibited from appearing in advertisements. A website in Barcelona called elperiodico.com printed the bathtub photo on Aug. 7 and announced that Phelps was the new face of Louis Vuitton. Then the Daily Mail in Britain followed up on Monday, Aug. 13, with two photos and the headline “Let the fashion endorsements begin, Michael Phelps announced as latest face of Louis Vuitton core values campaign.”

The second photo shows Phelps in a three-piece suit sitting on a couch next to Larisa Latynina of Russia, 77, who is the previous holder of the title “most-decorated Olympic athlete.” In both photos, there is a strategically placed Louis Vuitton bag.

A quick Google search shows the photos went viral and appeared on dozens if not hundreds of websites on Aug. 13 and 14.

An agent for Leibovitz confirmed to CNBC that she shot the photos, and that a Louis Vuitton campaign with Phelps was supposed to begin sometime this week.

The release of these photos before Aug. 16 raises the thorny question of whether the world’s most decorated athlete is in violation of rule with sanctions that could include fines and the stripping of medals.

Thus far, answers are not forthcoming from either the U.S. Olympic Committee, the International Olympic Committee or the London Olympic Committee. None of the organizations responded to attempts for comment. In fairness, many people involved in the Olympics have gone on vacation or are still traveling back from London.

Louis Vuitton representatives will say only that they did not release the photos. Leibovitz’s press agent says her office did not release the photos. Yet, the Daily Mail contained a quote from a Vuitton representative about the campaign. (That page has since been removed from the newspaper’s website.)

Previously: Michael Phelps hops in the tub with Louis Vuitton

If the photos were leaked intentionally, “it is probably a violation of Rule 40,” said Sekou Campbell, an intellectual property attorney at Fox Rothschild, who has written about Rule 40.

Just because the photos were part of a news story and not an official advertisement doesn’t mean they can’t violate the regulation. The rule was designed expressly to combat forms of marketing that aren’t official advertisements, Campbell said.

“That’s the point of ambush marketing,” he said. “There’s no formal ad, but they somehow generate coverage.”

The imposition of Rule 40 for London 2012 angered many athletes because it prevented them from monetizing their brand at the precise moment when it was most valuable. Most Olympic athletes are not household names like Phelps and are far less likely to garner lucrative sponsorship deals.

The U.S. Track and Field team began a Twitter campaign to end the regulation, with two hash tags: #rule40 & #wedemandchange. Gold medalist Dawn Harper tweeted out two photos mocking Rule 40. One was a self-portrait with a white tape covering her mouth; the words “rule 40” written on the tape. Olympic runner Nick Symmonds, who specializes in the 800m, was especially vociferous on Twitter. In a conversation with me Wednesday, he expressed frustration that he was unable to thank his sponsors, Nike and the Orgeon Track Club, during the Olympics. “It’s about being able to give them a return on their investment.”

His agent Chris Layne told CNBC if the IOC is going to continue with Rule 40, the athletes should be compensated monetarily for their participation in the Games. An example he cites is the Track and Field World Championships, where the top performers receive prize money. Layne said he believes Rule 40 emanates from antiquated thinking about the Games—that the athletes are amateurs but not professionals. But “the Olympics have changed,” and now, “It is truly a professional, commercial event from start to finish.”

Neither he, nor his client Symmonds, thinks Phelps should be sanctioned for the photos because it is unlikely that Phelps himself released them. Layne points out that, if anything, the situation highlights the difficulties of enforcement. “If this photo shoot were prior to Rule 40, how you can enforce that?”

Sanctions can range from removal of accreditation (not relevant once an athlete is finished competing), financial penalties, disqualification from the games, and according to the Olympic charter “a competitor or a team may lose the benefit of any ranking obtained in relation to other events at the Olympic Games at which he or it was disqualified or excluded; in such case the medals and diplomas won by him or it shall be returned to the IOC.”

Campbell said, “I imagine there is a negotiation going on behind closed doors to settle this without much fanfare.”

Sports law attorney Joe Baghat thinks the Olympic Committee will do nothing to Phelps because “it would be a public relations nightmare to come down on him because he is so well loved.”

Peter Carlisle, Phelps' longtime agent, told The Associated Press on Friday there's no issue with the IOC because Phelps did not authorize use of the pictures. In fact, Carlisle says there are dozens of unauthorized uses involving most of the top athletes during any Olympics. 

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