FIFPro v FIFA: the truth behind club success?

October 14, 2015

Whether it’s the seemingly incessant tube and rail strikes, black cab drivers rallying against Uber or Jeremy Corbyn’s leadership election, trade unions have been making the front pages recently.

Global football players’ union FIFPro (now following this apparent trend) has taken legal action against the world football’s governing body, FIFA (as if they haven’t got enough problems at the moment). The action takes the form of a competition law complaint lodged with the European Commission (’the “EC’’) specifically targeting FIFA’s core labour rules as set out in the Regulations on the Status and Transfer of Players (the “Regulations’’). The line of attack is that the player transfer system has evolved to be anti-competitive and into one that violates players’ rights; creating a competitive and economic imbalance between the richest and poorest clubs.

Background

In professional football, a transfer is simply the movement by one player from one club to another. The concept emerged when professionalism in the sport was first recognised back in the 19th century and rules followed to require players to register with a club each season, and to restrict the number of transfers a player could make in any playing season. Freedom to transfer was controlled by the club that held the player’s registration, and the player could only move with the club’s permission. Clubs quickly realised they could earn from this situation, and demanded transfer fees as compensation for the loss of the player. Since the first player to transfer for over £100 in 1893 (Willie Groves; West Bromwich Albion to Aston Villa), transfer fees have increased significantly, to the current world record of over €90m (Gareth Bale; Tottenham Hotspur to Real Madrid in 2013).

The motive for FIFPro’s action is rooted in this significant increase in player transfer fees. In recent years the modern game has become far more commercialised with cumulative club transfer spending across the world’s major leagues increasing year by year. More money has been injected into the game through overseas investment in clubs and third party ownership in players, as well as the dramatic increases in broadcasting rights for live competitive matches. FIFPro argues that this trend, overseen by the Regulations, has become: 1) a barrier to fair competition (as these fees increase the gap between the richest and poorest clubs); and 2) a restriction on the ability of players to ply their trade in other EU member states (as these higher fees allow clubs to increase the price tags on their players which can price other clubs out of the market and restrict the player’s freedom to transfer).

FIFPRO and the European Commission

FIFPro is the world players’ union, representing the interests of 65,000 players globally, with a history of taking legal action to defend and assert players’ rights.  FIFPro’s duty to its members is, at the very least, to ensure that players’ rights and contracts are being respected by clubs, governing bodies and the game’s practices and procedures. Players have the right to sue their clubs for breach of contract, but the legal systems in many countries in which FIFPro’s members play are not as robust as they are in others, and the processes to do so may not be quick, cheap or accessible. FIFPro is, therefore, the appropriate body to bring such a challenge as a class action on behalf of its members.

The EC is the executive body of the European Union (the “EU”) responsible for making laws, implementing decisions and policies and fundamentally upholding the EU treaties. Despite football being a global industry, the EC has standing to hear such a complaint because it represents 28 EU member countries, a selection of which play host to some of the world’s biggest leagues.

EU law

The free movement of people is one of the four fundamental freedoms upon which the EU is built (the others being goods, money and services). Any restriction on the ability of workers to move or provide services between or in different EU member states is prohibited by EU treaties. Some restrictions may be lawful if they can be shown to pursue a legitimate aim, provided they are proportionate to achieving that aim. Football falls within the regulatory regime of EU treaties because the sport is a commercial activity and the EU’s most popular sport.

Following the Bosman ruling by the European Court of Justice in 1995 (a case between the Belgian FA and a player, with judgment awarded in favour of the player meaning that clubs could not command transfer fees for players who were out of contract) and the Webster ruling in the Court of Arbitration for Sport in 2008 (a case between two football clubs and a player (who walked away and bought out his contract after three years) with the clubs fighting over appropriate compensation); FIFA was instructed to draw up a set of EU compliant rules with input from the relevant stakeholders (UEFA, FIFPro, clubs, etc.) that met five criteria. In 2001, the Regulations’ objectives were agreed, including player contractual stability, financial solidarity and integrity and competitive balance

FIFPro claims that its evidence shows that currently the transfer system fails to achieve these objectives and is evolving in the opposite direction to the Regulations’ objectives.

Transfer fees and the Regulations

Under the Regulations (specifically 13-16) player contracts can only be terminated by passage of time, mutual consent, or for sporting just cause. The evolution of the transfer fee has emerged from the legal principle that the movement of a player between clubs is, effectively, a breach of contract induced by the purchasing club. To offset the loss suffered by the selling club, the purchasing club pays a transfer fee for the player, the value of which is a product of negotiations between the two clubs (and often the player’s agent); intended to represent the true financial value of that player assessed by a range of factors (including, age, ability, recent form, experience, position, attitude and injury record).

Going forward, the EC must decide whether the Regulations, including FIFA’s implementation and enforcement, are anti-competitive under EU laws. This would require them to agree with FIFPro’s argument that FIFA’s current transfer rules under the Regulations constitute an unreasonable restraint of trade and barrier to free movement. The burden of proving that it is not rests with FIFA. If the decision is made in favour of FIFPro, this could render those specific aspects of the Regulations void and unenforceable, requiring FIFA to create, implement and enforce a new set of rules to govern player transfers in football.

Comment

Any legal process involving the EC will be drawn out. Despite the media attention given to this matter, any decision remains a long way off, and could take up to a year.

The transfer system has recently become a method for some clubs (e.g., notably Manchester City, A.S. Monaco and Paris Saint-Germain) to display their financial prowess by spending millions on players without the same commercial pressures for assessing their financial value as smaller clubs. This problem (clubs spending more than they earn to succeed, and consequently getting into crippling financial trouble) was targeted by FIFA’s Financial Fair Play Regulations (‘‘FFP’’), but has made little difference. Clubs with smaller purchasing power find themselves regularly outbid for players. This then either forces them to strengthen organically through their youth systems, or pay over budget for a player . The result places added financial pressure on the smaller club, increases the risk of players on squad fringes being pushed out (as budgets are squeezed), and collectively restricts that club’s access to the global talent pool. Additionally, players can find that potential purchasing clubs are held to ransom by their current clubs due to the price tag demanded to even open talks with the player, thus drastically reducing the number of clubs who can afford to buy the player. This is a key point for FIFPro as they claim that this has the effect of restricting the player’s movement and is therefore in restraint of trade.

The view that clubs are becoming more and more protective over their players by tying them to longer contracts (as a result of the increased purchasing power of the world’s biggest clubs) holds some truth. The assessment that this hinders the social and economic wellbeing of those players may not carry much weight given the significant salaries that players in the top leagues receive, and therefore it is hard to show much sympathy when top players earn more in a week than the average household earns in a year.

Furthermore, it is a long established trend in a free market economy that companies with the deepest pockets often attract the best talent. Any attempts to cap wages or transfer fees would be anti-competitive.  The richest clubs will remain able to pay more and more up front to bring the best players to their team sheets, and pay higher wages to keep them there. Many of the game’s richest clubs have reached the top thanks to a rich foreign investor whose money has allowed them to build squads of the best talent, rather than success on the field. Controlling how clubs can spend their money, such as by amending the Regulations, is one way to level this playing field (FFP went some way to achieving this on paper, but in practice made little difference to the spending culture of clubs and, in fact, it can be argued that FFP has only cemented the position of the elite clubs as caps on spending are directly linked to turnover); another would be to amend and tighten the rules on club ownership and director or shareholder loans, rather than the Regulations specifically.

At this stage, a game without transfer fees with player talent spread evenly amongst all competing teams, is more media speculation than potential reality. If the challenge is upheld, FIFA will be asked to re-write the Regulations. Whether that will lead to the abolition of transfer fees and closure of transfer windows is unclear. If it does, a possible alternative could be a ‘trade’ system (as used in American, Canadian and Australian sports) where clubs simply trade players by exchanging their contracts and registrations in an effective barter transaction.

For now, success in this legal action will mean that FIFA failed to show the game now operates in a fair, balanced manner with integrity (given what is going on in the background, readers will agree that FIFA has its work cut out on this last point). FIFPro may need to produce vast amounts of evidence to show conclusively that players are being actively prevented from making transfers which is, in turn, damaging players’ abilities to earn a living and apply their trade.

Secondly, FIFPro will need to show that competition is no longer fair and that the game is suffering as a whole.

It is perhaps no coincidence that the filing of this case coincides with FIFPro’s 50th anniversary and we would not be surprised if, much like London during a tube strike, it grinds to a standstill.

Thomas Gibby is a solicitor in Kerman & Co’s Sports team.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice.

Sources:

FIFPro website press release.
FIFPro study
Guardian article
ESPN article
the Regulations on the Status and Transfer of Players
the Bosman ruling
Textbooks: Sport; Law and Practice (Lewis & Taylor); Law & the Business of Sport (Griffith-Jones).

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