Due to the legitimate excitement over the recent Pechstein ruling, many have overlooked a previous German decision rendered in the Wilhelmshaven SV case (the German press did report on the decision here and here). The few academic commentaries (see here and here) focused on the fact that the German Court had not recognized the res judicata effect of a CAS award. Thus, it placed Germany at the spearhead of a mounting rebellion against the legitimacy of the CAS and the validity of its awards. None of the commentators weighed in on the substance of the decision, however. Contrary to the Court in Pechstein, the judges decided to evaluate the compatibility of the FIFA rules on training compensations with the EU free movement rights. To properly report on the decision and assess the threat it may constitute for the FIFA training compensation system, we will first summarize the facts of the case (I), briefly explicate the mode of functioning of the FIFA training compensation system (II), and finally reconstruct the reasoning of the Court on the compatibility of the FIFA rules with EU law (III).

I.               The complex facts of the case 

In a nutshell, the case concerns the move of an Argentinean player, with an Italian passport (as probably two-third of Argentina), to SV Wilhelmshaven and the training compensation due to its former youth clubs back in Argentina. The player, born in 1987, was an amateur player with an Argentinean club called Excursionistas from 20 March 1998 to 7 March 2005 and with River Plate from 8 March 2005 until 7 February 2007. From 8 February 2007 to 30 June 2007 he signed a fixed-term professional contract with SV Wilhelmshaven, which was later extended for one more season. 

In 2007 SV Wilhelmshaven was playing in the Regional League Nord (fourth tier of German football) and was therefore considered as a club of category 3 for the purpose of the FIFA Regulations for the Status and Transfer of Players (RSTP). In June 2007, Excursionistas and River Plate initiated proceedings with the FIFA Dispute Resolution Chamber (hereafter DRC) claiming €100,000 and €60,000 respectively in training compensation. These demands were partially granted  by the DRC (River Plate obtained “only” €57,500) in two concomitant decisions (available here and here) on 5 December 2008. 

SV Wilhelmshaven decided to appeal the DRC’s decisions to the Court of Arbitration for Sport (CAS). A hearing in front of a sole arbitrator was held on 26 August 2009 and the award rendered on 5 October 2009. The arbitrator confirmed the decision of the DRC awarding the claimed compensations to both Argentinean clubs and rejected all the objections raised by SV Wilhelsmshaven.

The club, however, continued stubbornly to refuse to pay the training compensations. On 13 September 2011, FIFA’s disciplinary Committee sanctioned SV Wilhelmshaven with additional fines and imposed a payment deadline of 30 days. If the club would not respect the deadline, its first team would face a six-point penalty. In light of non-compliance with this decision, FIFA called on the DFB (German FA) to enforce the sanction and secure the payment of the fines. The DFB dutifully implemented the order: six points were deducted and the club’s financial account with the DFB was debited from the requested €21,150. However, SV Wilhelmshaven is a tough nut to crack. Despite the confirmation of the sanctions by the DFB’s internal tribunal it kept on refusing to pay the training compensations awarded by the DRC and CAS. On 15 August 2012, the FIFA asked the DFB to deduct six more points. Given that, in the meantime, the club had been relegated to a lower league, the Norddeutscher Fussball Verband was competent to implement the latest sanction instead of the DFB. It did so on 23 August 2012 and the internal tribunal of the association later confirmed the validity of this decision. In May 2013, the club decided to challenge the point deduction in front of the German courts. Meanwhile, on 5 October 2012, a new decision of FIFA’s Disciplinary Committee imposed the relegation of the club. The SV Wilhelmshaven appealed the decision to the CAS, which confirmed FIFA’s disciplinary decision on 24 October 2013 (unfortunately the relevant CAS award has not been published). Hence, FIFA asked the DFB to implement this decision. The forced relegation was definitely ratified by the board of the Norddeutscher Fussball Verband on 7 December 2013 and validated by the internal tribunal on 20 February 2014. 

The club was challenging both the six-point deduction and the forced relegation in front of the regional Court of Bremen. In first instance, the tribunal simply rejected the claims of the club and considered that the CAS award, not challenged by the club in front of the Swiss Federal tribunal, was a valid legal basis for the sanctions. The club appealed the decision to the Highest Regional Court, which in its ruling of 30 December 2014 overruled the first instance Court. Indeed, it held that the CAS award was contrary to EU law and, therefore, could not be relied upon by the Norddeutscher Fussball Verband to sanction the club (more on this arbitration dimension of the case here and here). Combined with the Pechstein ruling, this case constitutes a powerful challenge to the CAS, but it is also a challenge to FIFA’s training compensation mechanisms. It is on this latter aspect that we will focus in this blog.

II.             The FIFA RSTP’s Training Compensation System 

Let us first take a close look at FIFA’s training compensation regime enshrined in Article 20 of the latest FIFA Regulations on the Status and Transfer of Players (RSTP). It must be highlighted that the FIFA Regulations were adopted after nearly two years of negotiations between the European Commission, UEFA, FIFA and FIFPro.[1] The negotiations ended with the adoption of a set of principles as a basis for the new FIFA transfer regulation. Concerning the training compensations, the principles stipulated that “in the case of players aged under 23, a system of training compensation should be in place to encourage and reward the training effort of clubs, in particular small clubs”. 

Article 20 of the FIFA RSTP transposing this principle reads as follows:

“Training compensation shall be paid to a player’s training club(s): (1) when a player signs his first contract as a professional, and (2) each time a professional is transferred until the end of the season of his 23rd birthday. The obligation to pay training compensation arises whether the transfer takes place during or at the end of the player’s contract. The provisions concerning training compensation are set out in Annexe 4 of these regulations.”

Hence, Article 20 establishes two situations giving rise to a right to obtain a training compensation: the signing of a first professional contract and each transfer until the end of the season of the player’s 23rd birthday. The key to understanding how this duty to pay a training compensation operates in practice can only be found in the Annex 4 of the RSTP. Article 1 paragraph 1 of Annex 4 qualifies the scope of the obligation to pay a training compensation. It states that: 

“A player’s training and education takes place between the ages of 12 and 23. Training compensation shall be payable, as a general rule, up to the age of 23 for training incurred up to the age of 21, unless it is evident that a player has already terminated his training period before the age of 21. In the latter case, training compensation shall be payable until the end of the season in which the player reaches the age of 23, but the calculation of the amount payable shall be based on the years between the age of 12 and the age when it is established that the player actually completed his training.”

Pursuant to article 2 paragraph 2 of Annex 4, a training compensation is not due when “the former club terminates the player’s contract without just cause (without prejudice to the rights of the previous clubs) “, or “the player is transferred to a category 4 club”, or “a professional reacquires amateur status on being transferred”. 

To calculate the amount of training compensation due, every association member of FIFA is “to divide their clubs into a maximum of four categories in accordance with the clubs’ financial investment in training players”.[2] For each category the training costs are equivalent “to the amount needed to train one player for one year multiplied by an average “player factor”, which is the ratio of players who need to be trained to produce one professional player”.[3] The current training costs as defined by each football association for 2014 are available here. The training compensation is meant to cover “the costs that would have been incurred by the new club if it had trained the player itself”.[4] Thus it is calculated “by taking the training costs of the new club multiplied by the number of years of training, in principle from the season of the player’s 12th birthday to the season of his 21st birthday”.[5] The training costs for players for the seasons between their 12^th and 15^th birthdays, however, are always based “on the training and education costs of category 4 clubs”.[6]

Following the negotiations with the European Commission, FIFA carved out a specific provision for players moving from one association to another inside the territory of the EU (including also the EEA). This provision stipulates that “[i]f the player moves from a lower to a higher category club, the calculation shall be based on the average training costs of the two clubs”.[7] If the player moves from a higher to a lower category, “the calculation shall be based on the training costs of the lower category club”.[8] Moreover, “the final season of training [in the sense of article 1 paragraph 1 Annex 4] may occur before the season of the player’s 21st birthday if it is established that the player completed his training before that time” .[9] Finally, and maybe most importantly, “[i]f the former club does not offer the player a contract, no training compensation is payable unless the former club can justify that it is entitled
to such compensation”.[10] 

The FIFA framework applicable to training compensations is not easy to navigate and many of its provisions have been refined by the jurisprudence of the CAS and the DRC (see this blog for a synthetic assessment).[11] The compatibility of this complex regulatory construction with EU law has never been tested in front of courts (be it national or European). This makes this lawsuit so decisive. 

III.           The SV Wilhelmshaven case and the compatibility of FIFA’s training compensation system with EU law

In its Bosman ruling, the Court of Justice (hereafter CJ) held that the aim of “encouraging the recruitment and training of young players must be accepted as legitimate”.[12] It added “that the prospect of receiving transfer, development or training fees is indeed likely to encourage football clubs to seek new talent and train young players” .[13] Nevertheless, it concluded that “because it is impossible to predict the sporting future of young players with any certainty and because only a limited number of such players go on to play professionally, those fees are by nature contingent and uncertain and are in any event unrelated to the actual cost borne by clubs of training both future professional players and those who will never play professionally”.[14] Hence, receiving such fees could not be “a decisive factor in encouraging recruitment and training of young players or an adequate means of financing such activities, particularly in the case of smaller clubs”.[15] As a final nail into the coffin of training compensations, at least it was thought at that time, the Court followed its Advocate General in holding that “the same aims can be achieved at least as efficiently by other means which do not impede freedom of movement for workers”.[16] 

The FIFA training compensation system as it stands nowadays is a rebuttal to the Bosman ruling. Indeed, it pretends to do the impossible in the eyes of the Court: calculating realistically the costs of training a player in a specific club in order to offer an objective benchmark for the training compensations. Moreover, FIFA simply disregarded the proposals made by Advocate General Lenz, who suggested potential alternative financing mechanisms to support the training of players.[17] FIFA’s rules, endorsed by the EU Commission, have never been tested in front of the CJ, though it came close to it in the relatively recent Olympique Lyonnais case. Here, the Court reaffirmed that “the objective of encouraging the recruitment and training of young players must be accepted as legitimate”.[18] It also recognized that “the clubs which provided the training could be discouraged from investing in the training of young players if they could not obtain reimbursement of the amounts spent for that purpose where, at the end of his training, a player enters into a professional contract with another club”.[19] Thus, it held “that a scheme providing for the payment of compensation for training where a young player, at the end of his training, signs a professional contract with a club other than the one which trained him can, in principle, be justified by the objective of encouraging the recruitment and training of young players”.[20] However, to be proportionate, the scheme must be “taking due account of the costs borne by the clubs in training both future professional players and those who will never play professionally” .[21] In the Olympique Lyonnais case, the French system in place at the time of the dispute, and since then replaced, was deemed incompatible with EU law as the amount of the compensation was not directly correlated with the costs of training the player. Nonetheless, UEFA and FIFA were prompt to see in this judgment a “significant step forward” [22] for the compatibility of the FIFA system with EU law. The present SV Wilhelmshaven case is a good opportunity to test this assumption.

SV Wilhelmshaven had argued in front of the CAS that the FIFA RSTP was contrary to the right to free movement of workers under EU law. However, the single arbitrator rejected the applicability of EU law. Instead, relying on previous CAS awards, it held that “such argument would have been available to the individual Player, not to the Appellant”.[23] This interpretation contradicts the well-established case law of the CJ[24], as noted by the Bremen Court.[25] Moreover, the CAS also declined to recognize the applicability to the case at hand of Article 6 of the Annex 4 to the FIFA RSTP. It considered that “[t]he title of this provision clearly suggests that its scope is narrowly circumscribed within a limited geographic area, i.e. the EU/EEA territory”.[26] Furthermore, “it appears that article 6 of Annex 4 to the FIFA Regulations is nothing more than the codification of the system agreed upon by the European authorities and put into place to govern the transfer of a player moving from one association to another inside the territory of the EU/EEA”.[27] Thus, the panel sees “no reason to depart from the unambiguous wording of article 6 of Annex 4 to the FIFA Regulations, which is obviously not applicable in the case of a player moving from a country outside the EU/EEA to a country within the EU/EEA”.[28] On this exact point, the Bremen Court begged to differ. 

The Bremen Court was not convinced by the distinction between intra-EU and extra-EU transfers made in article 6 Annex 4. The right to free movement of workers extends also to EU citizens moving from a non-EU country to an EU Member state. Therefore, not only could the club legitimately invoke the right to free movement of its player, but it was also right to consider that article 6 annex 4 should have been applicable to an EU citizen moving from Argentina to Germany. Consequently, the German judges considered that the non-application of article 6 and the imposition of the calculation method foreseen in article 4 and 5 of the Annex 4 were contrary to the player’s free movement rights under EU law.[29] Nonetheless, it also acknowledged that the FIFA training compensation rules were supporting “the objective of encouraging the recruitment and training of young players”.[30] Furthermore, Article 6 of the Annex 4 is deemed suitable to attain this objective and compatible with EU law.[31] The key point being for training compensations to cover only the real costs endured to train the player[32], this is what the CAS and the DRC have failed to take in account in the SV Wilhelmshaven case.[33]

Conclusion 

The SV Wilhelmshaven case has potentially damaging consequences for the Court of Arbitration for sport. It intrudes into the system of private enforcement of the CAS awards by forcing the sporting association to consider whether the awards are compatible with German public policy, and especially with EU law before enforcing disciplinary measures based on them. We have deliberately ignored this aspect of the case, as it will be the object of a future blog post. Instead, we decided to focus on FIFA’s training compensation system and its compatibility with EU law.

The Bremen Court’s ruling highlighted the substantial shortcomings of the CAS in dealing with EU law. A long-standing CAS jurisprudence was shown fundamentally flawed and overtly contradictory to the CJ’s interpretation of EU law. Moreover, the FIFA training compensation system as it stands was considered incompatible with EU law in the context of a transfer of an EU citizen from Argentina to an EU Member state. This is not a remote scenario especially when South-American players are involved. However, there is also some good news for FIFA, as the Court found that the FIFA intra-EU training compensation rule is in line with EU law. The case is now at the Bundesgerichtshof (BGH), the highest German civil Court. With this case and the Pechstein case on its plate, the BGH will fundamentally shape the future of sport’s private dispute resolution mechanisms and governance structure. If it is asked to do so or ex officio if it feels the need, the BGH could refer a preliminary question to Luxembourg on the compatibility of the FIFA training compensation system with EU free movement rights. This would be the best way to finally settle a question which has been left wide open since the Bosman ruling, now 20 years ago.

[1] See B. Garcia, ‘The 2001 informal agreement on the international transfer system’, European Sports Law and Policy Bulletin, I-2011, pp.17-29.

[2] Article 4 paragraph 1 of Annex 4.

[3] Article 4 paragraph 1 of Annex 4

[4] Article 5 paragraph 1 of Annex 4

[5] Article 5 paragraph 2 of Annex 4

[6] Article 5 paragraph 3 of Annex 4

[7] Article 6 paragraph 1 a) of Annex 4

[8] Article 6 paragraph 1 b) of Annex 4

[9] Article 6 paragraph 2 of Annex 4

[10] Article 6 paragraph 3 of Annex 4

[11] See F. de Weger, The jurisprudence of the FIFA Dispute Resolution Chamber, ASSER press, 2008, pp. 117-133.

[12]Case C-415/93 Union Royale Belge des Sociétés de Football Association and Others v Bosman and Others [1995] ECR I-4921, paragraph 106.

[13] Ibid, paragraph 108.

[14] Ibid, paragraph 109.

[15] Ibid.

[16] Ibid, paragraph 110.

[17] AG Lenz in Case C-415/93 Union Royale Belge des Sociétés de Football Association and Others v Bosman and Others, [1995] ECR I-4921, paragraph 239

[18] C-325/08 Olympique Lyonnais SASP v Olivier Bernard [2010], paragraph 39.

[19] Ibid, paragraph 44.

[20] Ibid, paragraph 45.

[21] Ibid.

[22] J. Zylberstein, ‘The Olivier Bernard Judgment : A Significant step forward for the training of players’, in M. Colucci, European Sports Law and Policy Bulletin 1/2010

[23] CAS 2009/A/1810 & 1811 SV Wilhelmshaven v. Club Atlético Excursionistas & Club Atlético River Plate, award of 5 October 2009, paragraph.42. Referring to CAS 2004/A/794 and CAS 2006/A/1027.

[24] « Whilst the rights deriving from Article 48 of the Treaty are undoubtedly enjoyed by those directly referred to - namely, workers - there is nothing in the wording of that article to indicate that they may not be relied upon by others, in particular employers. » C-350/96 Clean Car Autoservice Gmbh v Landeshauptmann von Wien [1998] ECR I-2521, paragraph 19.

[25] OLG Bremen, 30.12.2014, 2 U 67/14

[26] CAS 2009/A/1810 & 1811 SV Wilhelmshaven v. Club Atlético Excursionistas & Club Atlético River Plate, award of 5 October 2009, paragraph 46.

[27] Ibid, paragraph 49

[28] Ibid.

[29] OLG Bremen, 30.12.2014, 2 U 67/14, p.22-25.

[30] „Daraus folgt, dass eine Regelung wie im vorliegenden Fall, die eine Ausbildungsentschädigung für den Fall vorsieht, dass ein Nachwuchsspieler nach Abschluss seiner Ausbildung einen Vertrag als Berufsspieler mit einem anderen Verein als dem abschließt, der ihn ausgebildet hat, grundsätzlich durch den Zweck gerechtfertigt werden kann, die Anwerbung und Ausbildung von Nachwuchsspielern zu fördern“. Ibid, p.22.

[31] „Soweit in Art.6 Ziff. 1.b) bei einem Wechsel des Spielers von einem Verein der höheren in eine niedrigere Kategorie die Entschädigung gemäss den Trainingskosten des Vereins der tieferen Kategorie bemessen wird, handelt es sich um eine Regelung, die zu einer Erleichterung des Vereinswechsels führt, also gegenüber der an sich erforderlichen Orientierung an den Kosten des ausbildenden Vereins im Hinblick auf Art.45 AEUV eine Besserstellung des Spielers enthält und daher insoweit unbedenklich ist.“ Ibid, p.25.

[32] « Transferentschädigungen erfüllen mithin die Funktion des Ersatzes von Ausbildungskosten nur dann, wenn sie sich an den tatsächlichen angefallenen Ausbildungskosten orientieren und nicht am Marktwert des fertigen Spielers ». Ibid, p.23.

[33] « Die hier vorgenommene Entschädigung orientiert sich somit nicht an den für die Ausbildung bei den argentinischen Vereinen angefallenen Kosten, sondern nimmt einen Ausgleich in Höhe des pauschal eingeschätzten Aufwands vor, der dem übernehmenden Verein im Hinblick auf diesen Spieler erspart worden ist. » Ibid, p.24.

On 1 April 2015, the new FIFA Regulations on Working with Intermediaries (hereinafter referred as the Regulations) came into force. These Regulations introduced a number of changes as regards the division of competences between FIFA and its members, the national associations. A particularly interesting issue from an EU competition law perspective is the amended Article 7 of the Regulations. Under paragraph 3, which regulates the rules on payments to intermediaries (also previously referred to as ‘agents’), it is recommended that the total amount of remuneration per transaction due to intermediaries either being engaged to act on a player’s or club’s behalf should not exceed 3% of the player’s basic gross income for the entire duration of the relevant employment contract. In the case of transactions due to intermediaries who have been engaged to act on a club’s behalf in order to conclude a transfer agreement, the total amount of remuneration is recommended to not exceed 3% of the eventual transfer fee paid in relation to the relevant transfer of the player.

In other words, the new Regulations recommend a benchmark cap on the percentage of remuneration that an intermediary engaged in negotiations with a view to concluding an employment contract or a transfer agreement can receive for his/her service. From the perspective of an antitrust lawyer such a provision immediately rings a bell of a potential distortion of competition. The Association of Football Agents (AFA), the representative body of 500 football agents in England, contends in a complaint to the European Commission that Article 7(3) of the Regulations distorts competition under EU law. In this regard, the present blog post will analyse whether Article 7(3) of the Regulations infringes Article 101 of the Treaty on the Functioning of the European Union (TFEU). If so, what would be the possible justifications and which are the requirements that must be fulfilled in the case at hand.

The general rule

To begin with, Article 101(1) of the TFEU stipulates that the following shall be prohibited: “all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of completion within the internal market”.[1] Thus, in order to find an infringement of Article 101(1), it must be established that 1) the FIFA Regulations constitute a decision by an association of undertakings; 2) that Article 7(3) of the Regulations may affect trade between EU Member States; and 3) that Article 7(3) of the Regulations has as its object or effect the prevention, restriction or distortion of competition within the internal market.

Decision by an association of undertakings

Even though, the concept of ‘decision by an association of undertakings’ is not defined in the founding treaties of the European Union, this notion has been interpreted broadly by the Court of Justice of the European Union (CJEU).[2] In order to determine whether the FIFA Regulations are to be regarded as a decision of an association of undertakings within the meaning of Article 101(1) TFEU it has to be established that the members of FIFA are undertakings for the purpose of EU competition law and that FIFA constitutes an association of undertakings. In Piau it was settled that “…it is common ground that FIFA’s members are national associations, which are groupings of football clubs for which the practice of football is an economic activity. These football clubs are therefore undertakings within the meaning of Article 81 EC and the national associations grouping them together are associations of undertakings… ”.[3] Therefore, from the judgement of the Court of First Instance (now the General Court) it is plain that FIFA constitutes an association of undertakings within the meaning of Article 101(1) TFEU. As regards the concept of ‘decision’, the General Court declared that since players’ agents receive a fee on a regular basis for the provision of their service, this constitutes an economic activity which does not fall within the scope of the specific nature of sport as defined by the previous CJEU’s case-law.[4] Moreover, the Regulations adopted by FIFA are binding  on national associations members of FIFA and on clubs, players and their agents and thus those regulations constitute a decision by an association of undertakings within the meaning of Article 101(1) TFEU.[5] In addition, in a recent case, the CJEU adjudged that even a price recommendation, regardless of its exact legal status, may be regarded as constituting such a decision.[6] Therefore, from the abovementioned it follows that based on the proximity of the legal issues discussed in Piau and the main research question at hand, it is likely that the new FIFA Regulations will be deemed a decision by an association of undertakings for the purpose of Article 101(1) TFEU.

Effect on trade between Member States

According to the Commission guidelines on the effect on trade, it is the agreement or decision that must be capable of affecting trade between Member States. It implies that there must be an impact on cross-border economic activity and that it must be possible to foresee with a sufficient degree of probability that the decision may have direct or indirect, actual or potential influence on trade between EU countries.[7] Since the Regulations at hand bind all members of FIFA, including all 28 EU Member States, and concern intermediaries operating in every EU country, there is undoubtedly a potential effect on trade between Member States. As a result of the provisions under Article 7(3) of the Regulations on Working with Intermediaries, every football player or club’s agent in the EU will be potentially restricted to receive a remuneration under the specified recommended price cap. Therefore, the second condition under Article 101(1) TFEU is also fulfilled.

Object or effect the prevention, restriction or distortion of competition

Article 101(1) (a) TFEU lists “…directly or indirectly fix purchase or selling prices…” as an object by an agreement that constitutes a restriction on competition.[8] Further, the Commission has continuously interpreted recommended pricing as falling under the category of price fixing in the sense of Article 101.[9] In this line of reasoning, the CJEU stated that in order to establish that a recommendation constitutes price-fixing, account must be taken of three factors: 1) the common interest between the members of the association, 2) the nature of the recommendation and 3) the statutes of the association.[10] The same test was later applied also by the Commission in its Fenex Decision.[11] Furthermore, in its Guidelines on the applicability of Article 101 to horizontal co-operation agreements, the Commission has acknowledged that any standard terms containing provisions which influence the prices charged to customers, including recommended prices, would constitute a restriction of competition by object. The General Court has also confirmed that recommended rates may constitute indirectly a pricing system binding its members.[12] Therefore, Article 101(1) (a) TFEU has been interpreted by the Commission and the CJEU as capable of encompassing “recommended prices” under the scope of “price-fixing”.

As regards the content of Article 7(3) of the Regulations, it clearly recommends a 3% benchmark cap on the remuneration an intermediary may claim as a result of his/her service. Firstly, even though the provision recommends the percentage cap, the national football associations are bound to implement the Regulations at the national level and the decision of whether to impose the remuneration cap is ultimately determined by the football clubs and the players.[13] By being able to limit the percentage of the commission that an intermediary can receive for a certain transaction, the relevant participating clubs and football players will have the common interest to secure a bigger ‘piece of the pie’ for themselves. Secondly, the nature of the recommended cap, even though non-binding, is detailed, clear and specific. It also appears in a binding legislative document, which national associations are required to fully implement. Nonetheless, even if they decide not to apply the recommended price cap, clubs and players will still be inevitably influenced by such a recommendation in their business activities.[14] Therefore, indirectly the nature of Article 7(3) encourages national associations to follow the recommended limit on agents’ remuneration. Lastly, the statutes of FIFA (Articles 2, 5, 10 and 13), give the Association the competence to draw up regulations and ensure their enforcement, regulate the transfer of players and oblige its members to fully comply with its regulations. As a consequence, even though the remuneration cap is a recommendation by FIFA it is highly likely that de facto this provision will lead to a coordinated behaviour among clubs and players as regards limiting the maximum payment that an intermediary can receive.

Typically, agents receive between 5-10% of their player’s gross income, so the limit of 3%, if enforced, would be a serious damaging shift for agents from a financial perspective as well.[15] Moreover, Article 7(3) of the Regulations constitutes a measure that could also be detrimental to the players and the quality of service that they receive. Due to the price cap, intermediaries will be discouraged to compete and improve. The goal of players’ having experienced and professional agents, who provide a high quality of services, is to assist and guide athletes in achieving the best possible deal in usually considered short careers.[16] As a result, the benchmark cap enshrined in Article 7(3) has the object of distorting competition on the market of football intermediaries’ services by both limiting the amount of remuneration and by indirectly decreasing the quality of the provided services.

At national level, not only the AFA in the UK has contested the Regulations, but also recently, after a complaint lodged by Rogon Sport Management, the German District Court (Landgericht Frankfurt/Main) suspended the implementation of the national regulation adopted by the German Football Association (DFB) transposing the FIFA’s Regulations. The District Court ruled that the limit on agents’ commissions in player transfers constitutes and unlawful restriction on the right to provide services even though DFB was following the recommendations stipulated by FIFA.

In the alternative, even if a restriction by object cannot be established, Article 7(3) still has the effect of distorting competition under Article 101(1). The criteria establishing whether a decision by an association is restrictive by its effect include defining the relevant market and assessing the possibility to access it, while taking into account existing and new competitors.[17] It must also be appraised whether the decision restricts actual or potential competition that would have existed in its absence.[18] Concerning the present discussion, Article 7(3) of the Regulations applies on the market of football intermediaries’ services in the EU. There will be undoubtedly an effect on the behaviour of existing intermediaries since normally their remuneration has been 5-10% and now it will be capped to 3%. This amendment could have the possible effect of lowering the level of competition on the market, decreasing the quality of the provided services and possibly driving some intermediaries out of business. In the absence of the decision at hand, these effect on competition would be significantly less likely to occur. As a consequence, the decision of FIFA to recommend a restriction on the remuneration of football intermediaries will have the effect of distorting competition.

Therefore, from the abovementioned analysis it follows that the recommended remuneration cap of 3% falls under the scope of Article 101(1) TFEU and constitute a decision by an association which has effect on trade between Member States and which restricts competition within the internal market.

Possible Justification

Although, a restriction within the meaning of Article 101 has been established, it remains to be analysed whether such a restriction may be justified. In Wouters, the CJEU held that not every decision of an association of undertakings which restricts the freedom of action of the parties necessarily falls within Article 101(1).[19] In order to apply this provision, account has to be taken of the overall context in which the decision was taken, its objectives. Subsequently, it has to be considered whether the consequential restrictive effects are inherent in the pursuit of those objectives.[20] In that context, it is important to verify whether the restrictions of competition are limited to what is necessary to ensure the implementation of legitimate objectives.[21] In other words, for a restriction to be justified, there must be a legitimate reason and the restrictive measure has to be necessary and proportionate for the achievement of the legitimate aim.

In Piau, the Regulation of Agents was justified as it aimed “to raise the professional and ethical standards for the occupation of players’ agent in order to protect players, who have a short career”.[22] In this case, the General Court ruled that the Commission did not err in its assessment by deciding that the licence system in place, which imposes qualitative rather than quantitative restrictions, seeks to protect players and clubs and takes into consideration the risks incurred by players in the event of poorly negotiated transfers.[23] Moreover, according to FIFA, the European Commission, EPFL and FIFPro, it is indisputable that the aim of the new Regulations is to enhance financial transparency related to players’ transfers and the protection of minor players. In this regard, even though the Commission or the CJEU has not yet decided upon the legitimacy of Article 7(3), it can be fairly assumed that the percentage cap, aiming to protect the exploitation of football players through enhanced financial transparency, can be considered as a legitimate aim.

Nevertheless, contrary to Piau, which concerned the licensing procedure of an agent, the present Article 7 stipulates a qualitative criterion rather a quantitative one. Furthermore, it is dubious whether such a recommended benchmark is suitable for achieving the legitimate aim of protecting football players. According to some commentators, it is foreseeable that the remuneration cap will lead to underhand, illegal payments so that intermediaries can maintain the level of compensation that they receive. As a result, intermediaries will further the very problem that FIFA intends to resolve by behaving in a manner that completely negates the primary purpose of the regulations. It can thus, lead to agents looking for new inventive ways to secure payment, for instance through higher percentage for work carried out in relation to the player’s commercial rights or signing longer representation contracts, which in turn  can also result in exploiting players. Some other negative effects may be the emergence of more persons involved in player transfers (lawyers, accountants or financial advisors), leading to less legal certainty and more disputes over the question who is liable for a certain transaction. Furthermore, a protection of minor players (Article 7) and ensuring financial transparency (Article 6) are already regulated in other provisions of the Regulations and thus a 3% cap seems to be redundant limitation towards the achievement of those goals.

Instead, other less restrictive possibilities for attaining the protection of football players are available. As proposed by AFA, a model of self-regulation and accreditation of intermediaries can be set up in co-operation with the national football associations.[24] By such a system, clubs and players could ensure themselves that an intermediary is of a particular standard, even though they would have the freedom to conclude a contract with those agents who do not fulfil a binding accreditation standard.[25] Such a system will not only be more preferred than the current FIFA’s Regulations but it will also be compatible with EU competition rules.[26] Other commentators consider that a more efficient option would be for FIFA not to cap agent fees but rather to strengthen existing ‘fit and proper’ enforcement measures to ensure global compliance with those standards. In this way, the fear expressed by FIFPro that “unnecessarily large amount of money disappears from professional football through agents” will be countered by stricter enforcement measures without restricting competition on the market. Another option for FIFA to avoid anti-competitive effects is for example, the publication of historical or survey-based price information by independent parties. Such regular publications might provide more trustworthy price guides reflecting the dynamics of the relevant market, enhance price transparency and at the same time avoid distortion of competition.

In any event, the measure in question appears to go beyond what is necessary. Typically agents receive between 5-10% of the player’s gross income and thus, a 3% recommended cap is seriously damaging the financial interests of intermediaries. Here, it ought to be mentioned that during the consultation process at FIFA’s Executive Committee, which led to the approval of the Regulations, all relevant stakeholders were present (member associations, clubs, FIFPro, professional football leagues, etc.) with the exception of any intermediaries’ representatives. Subsequently, the interests of agents were neglected during the discussion and the outcome was a stronger bargaining power granted to clubs and players in relation to transfers’ negotiations. This imbalance might lead to an asymmetry of information between agents and players and thus, to a distortion of the market. Further, not only is the content of Article 7(3) too strict but it is also too general and broad, encompassing all intermediaries and not foreseeing any exceptional circumstances. There is also no procedure in place, which allows agents to prove their qualifications and loyalty. As a result, even though an intermediary must have an impeccable reputation and is not allowed to charge minor football players, he/she is still presumed to be abusing his/hers powers and there is no mechanism allowing an intermediary to rebut this presumption.

Since, Article 7(3) of the Regulations does not satisfy the broad criteria for justification in Wouters and API, it is highly unlikely that it will pass through the narrow efficiencies test laid down in Article 101(3) TFEU. Hence, this assessment will not be analysed in this blog post.

Therefore, regardless of the fact that Article 7(3) of the Regulations serves a legitimate aim, it is dubious whether this particular measure is suitable for the achievement of the said goal and it is apparent that its restrictive effects go beyond what is necessary.

Conclusion

In this post, the potential negative effects of Article 7(3) of the FIFA Regulations on Working with Intermediaries on EU competition law were considered. It was concluded that pursuant to the Piau case and the Commission’s decisional practice, such a recommendation constitutes a decision of an association of undertakings which is capable of distorting competition within the meaning of Article 101(1). Next, it was analysed whether the legitimate reason of preventing the abusive practices of players’ exploitation can justify the restriction on competition. The author’s view is that a 3% cap on the commission granted to agents is not the most appropriate measure to do so and thus it constitutes a disproportionate restriction on EU competition rules.

[1] Consolidated version of the Treaty on the Functioning of the European Union (2012) OJ C326/01 art 101.

[2] Case C-309/99 Wouters and Others [2002] ECR I-1577 para 64; Case C-35/96 Commission v Italy [1998] ECR I-3851 para 60; A recommendation by an Association can also constitute a decision, see Case C 96-82 IAZ v Commission [1983] ECR 3369 paras 20-21.

[3] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 69.

[4] Ibid, para 73.

[5] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 75. See also Case C-45/85 Verband der Sachversicherer v Commission [1987] ECR 405 paras 29-32 and Case C-309/99 Wouters [2002] ECR I-1577 para 71.

[6] Case C-136/12 Consiglio nazionale dei geologi v Autorità garante della concorrenza e del mercato (ECJ 18 July 2013) para 46; See also Case C-45/85 Verband der Sachversicherer v Commission [1987] ECR 405 para 32.

[7] Ibid, paras 19-24.

[8] Consolidated version of the Treaty on the Functioning of the European Union (2012) OJ C326/01 art 101(1) (a).

[9] Belgian Architects’ Association [2005] OJ L4/10 paras 3 and 4; Case COMP/37.975 PO/Yamaha [2003] para 141; See also, a tariff recommendation issued by an Association of undertakings was considered to be anticompetitive in Fenex [1996] OJ L181/28 para 74.

[10] Case C-45/85 Verband der Sachversicherer v Commission [1987] ECR 405 paras 29-31.

[11] Fenex [1996] OJ L181/28 para 47.

[12] Joined Cases T-213/95 & T-18/96 Stichting Certificatie Kraanverhuurbedrijf (SCK) and Federatie van Nederlandse Kraanbedrijven (FNK) v Commission [1997] ECR II-1739 paras 159 and 161-164.

[13] See the text of Article 7 of the Regulations.

[14] See Fenex [1996] OJ L181/28 para 73.

[15] UEFA ‘Club Licensing Benchmarking Report 2012’ < http://www.uefa.org/MultimediaFiles/Download/Tech/uefaorg/General/02/09/18/26/2091826_DOWNLOAD.pdf> page 54.

[16] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 102.

[17] Case C-234/89 Delimitis [1991] ECR I-0935 paras 14, 16 and 18.

[18] Ibid, para 19 and 21.

[19] Case C-309/99 Wouters and Others [2002] ECR I-1577 para 97.

[20] Ibid.

[21] Joined Cases C-184 to 187, 194, 195 & 208/13 API (CJEU 4 September 2014) para 48; Case C-519/04 P Meca-Medina [2006] ECR I-6991 para 47 and Case C-136/12 Consiglio nazionale dei geologi v Autorità garante della concorrenza e del mercato (ECJ 18 July 2013) para 54.

[22] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 102.

[23] Ibid, para 100.

[24] Nick De Marco, ‘The New FA Football Intermediaries Regulations and the Disputes Likely to Arise’ (Blackstone Chambers, 27 April 2015) pages 13-14.

[25] Ibid.

[26] Ibid.