Editor’s note: Josep F. Vandellos is an international sports lawyer associated to RH&C (Spain). He is also a member of the Editorial Board of the publication Football Legal and a guest lecturer in the ISDE-FC Barcelona Masters’ Degree in Sports Management and Legal Skills.

Article 6 of Annexe IV (Training compensation) of the FIFA-RSTP (Ed. 2016) contains the so-called “Special Provisions for the EU/EEA” applicable to players moving from one association to another inside the territory of the European Union (EU) or the European Economic Area (EEA).
The provisions regarding training compensation result from the understanding reached between FIFA and UEFA with the European Union in March 2001[1], and subsequent modifications introduced in the FIFA-RSTP revised version of 2005 to ensure the compatibility of the transfer system with EU law.[2]
This blog will focus on the exception contained in article 6(3) Annexe IV of the FIFA-RSTP. According to this article, when “the former club” fails to offer a contract to the player, it loses its right to claim training compensation from the players’ new club, unless it can justify that it is entitled to such compensation. Instead, the right of “previous clubs” to training compensation is fully preserved irrespective of their behaviour with the player.[3] From a legal standpoint, such discrimination between the “former club” and the “previous clubs” raises some questions that I will try to address in this paper.
For that purpose, the author will depart from the restrictive interpretation of article 6(3) adopted by the FIFA Dispute Resolution Chamber (DRC) and continue with a substantive assessment of the rule, firstly by looking at its purposive aim and secondly, by evidencing the potential negative impact on players’ mobility and its inherent anticompetitive effects. 

A. Article 6(3) Annexe IV of the FIFA-RSTP (Ed. 2016)

Article 6(3) of the FIFA-RSTP reads as follows: “3. If 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. The former club must offer the player a contract in writing via registered post at least 60 days before the expiry of his current contract. Such an offer shall furthermore be at least of an equivalent value to the current contract. This provision is without prejudice to the right to training compensation of the player’s previous club(s).”[4]
In summary, as a general rule, the former club of the player loses its right to claim training compensation if it fails to offer the player a contract in the terms described by the article, or cannot demonstrate a legitimate interest.
So far, the DRC has been consistent in interpreting that the obligation to offer the player a contract lies exclusively with the former club of the player as opposed to the previous clubs. In other words, the previous club is entitled to ask for training compensation when the player signs the first professional contract[5] no matter whether they offered the player a contract or showed bona fide interest in retaining him.
At first glance, this rigid interpretation might appear controversial in light of the more pragmatic approach towards the formal requirements of article 6(3) adopted in the CAS award 2009/A/1757 between MTK Budapest v. FC Internazionale Milano SpA[6]. In this case, in order to conclude that MTK Budapest was still entitled to request training compensation despite not having offered the player a contract in the terms indicated in the regulation, the adjudicating Panel emphasized that “[the] aims of sporting justice shall not be defeated by an overly formalistic interpretation of the FIFA Regulations which would deviate from their original intended purpose”.[7]
The DRC has thus systematically admitted claims of previous clubs against clubs that have registered professional players for the first time (e.g. DRC decision of 17 May 2016[8]) without delving into whether such clubs are indeed entitled to training compensation or not.
In an attempt to defy such dogmatic approach to the issue, I question whether the different references made in Annexe IV of the FIFA RSTP to the “former club”[9] could and should instead be interpreted more extensively, so as to include all former clubs (thus including previous clubs) where a player has been registered. Firstly, by having a look at the systematic context of the rule and its purposive interpretation[10], and secondly, by taking into consideration the potential competitive disadvantages between European clubs resulting from the regulation.
As to the rationale of the rule, the FIFA DRC jurisprudence (vid. e.g. DRC Decision of 27 April 2006 ref. no. 461185[11]) indicates that “the spirit of and purpose of article 6 para 3 of Annexe 4 of the RSTP, 2016 edition, is to penalise clubs which are obviously not interested in the players’ services as a professional, no matter if the club would have to offer the player an employment contract for the first time or a renewal due to the expiry of an already existing contract.”[12]
It appears therefore, contrary to the spirit of the rule that a club that has shown no interest in keeping the player as a professional, a roster or for its academy, can at a later stage request to be rewarded for the training of that player, irrespective of whether it was the former club, strictly speaking, or the former former club, so to speak (i.e. the previous club in the RSTP exact wording).
One could easily argue at this point, and I would subscribe to it, that at very young ages it is either legally prohibited for training clubs to offer a contract, or unreasonable to require clubs to offer contracts to all its players in order to safeguard their potential right to training compensation.  This was highlighted by the CAS Panel in the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC[13] which was the appeal against the above cited DRC Decision of 27 April 2006.
However, nothing prevents training clubs to at least show a genuine interest in retaining the player as an amateur by formally offering him to continue training with them or even through a simple positive evaluation of the player. In order to alleviate the unreasonable burden that such obligation would suppose on training clubs, a solution could be to require the genuine interest at least, for players as from the season of their 16^th birthday. This would coincide with the age when in most EU countries players are legally allowed to sign employment contracts, and form a strict sportive perspective, the age from when training compensation is calculated in full according to article 5(3) of Annexe IV.
The final reference in article 6(3) (i.e. “This provision is without prejudice to the right to training compensation of the players’ previous club(s)”) helps to ground this interpretation. It is difficult to justify from a legal standpoint, why previous clubs should be exempted (as they, in fact, are) from observing the same rules and obligations as the former clubs, especially considering the principle of free movement of workers in the EU. The right to claim training compensation is, being redundant, “without prejudice to the right (…) of the players’ previous club(s)”. Previous clubs should therefore, demonstrate as well their entitlement to training compensation by evidencing a genuine interest in the player, such as former clubs do. 
To illustrate the situation, consider the case were an EU football club omits to offer one of its players (e.g. 18 years old) a professional contract in the terms of article 6(3) of Annexe IV, and that player further registers as an amateur with another EU club for one season. That second club also fails to offer the player (now 19 years old) a professional contract. After two seasons as an amateur, the player, finally signs a professional contract with a third EU club at the age of 20 years. The current interpretation of the exception leads to conclude that the first club, which failed to offer the player a professional contract, perhaps because he was simply not sufficiently interesting to retain, would now be reinstated in the right to claim training compensation, while the former club, under identical circumstances and reasons would be deprived from it.
Within those parameters, de lege ferenda the exception of article 6(3) could reasonably be extended to those previous clubs that failed to show the so-called bona fide interest. This way, by failing to show real interest in keeping a player, the previous clubs would be also prevented from asking training compensation upon the first registration of the player as a professional, to the same extend as the former club when it fails to offer the player a contract, in the terms indicated by the exception.
Turning now the attention, to EU law, the conclusions on why article 6(3) Annexe 4 current interpretation seems unfair and should be reformulated, point towards the same direction. 
 

B. Article 6(3) Annexe IV of the FIFA RSTP and EU competition law

The Bosman ruling and its most recent successor, the Bernard ruling, stand out as constant reminders that EU Law applies to the realm of European club football insofar as it constitutes an economic activity in the sense of Article 2 of the Treaty.[14] It is nowadays unarguable that football is a real economic activity and that the regulations adopted by its governing bodies must respect EU Law as long as they apply in the territory of the EU, or in case the player concerned has a European passport and is transferring to an EU Member State. Only rules which are “inherent to sport” such as the rules of the game, and other “practices likely to be exempted” meaning, those activities not necessarily linked to sport but which are worth of protection, could potentially fall outside the remit of EU competition law (the sporting exception) as pointed out by the “Helsinki Report on Sport” in 1999. However, the decision in the Meca-Medina case went even further, overcoming the traditional distinction between rules of purely sporting nature from others, to determine that rules cannot be of purely sporting nature when they have economic repercussions, and consequently, making it possible to explore new legal avenues to test regulations that in principle may seem outside the scope of EU competition law (such as the doping regulations in Meca-Medina).
According to Bosman[15] and Bernard, training compensation is a practice worth of protection, but it is undeniable that its rules have strong economic implications, for they are expressly meant to financially reward[16] football clubs involved in the training and education of players when these move to other clubs. For that reason, they fall under the remit of EU Law.
The legitimate aim of the training compensation system is also embraced by legal scholars. For example, while delving into the aftermath of the Bosman case and the agreement reached between FIFA and the EU Commission in 2001, S. Weatherill remarked that “(…). Sport has special features that deserve respect. In accordance with Bosman, it should be regarded as legally permissible for football to devise an internal taxation system to transfer money into the hands of nursery clubs, as part of a scheme for sustaining a larger number of clubs than would survive in ‘pure’ market conditions and to diminish gaps in economic strength between clubs.”[17]
However, it is my firm belief that Annexe IV of the FIFA RSTP has in many ways gone beyond the indications in Bosman, the Helsinki Report[18] and later in Bernard. In this last case, the Court referred to a system meant to compensate[19] and not reward training; and it is precisely that difference regarding the foundations of the system implemented by FIFA that leads to disproportionate results when the amounts to pay as training compensation are superior to the real costs incurred by the training clubs.[20]
All these issues jeopardize free mobility within the EU[21], for they restrict the chances of clubs to recruit players, and have an impact on the commercial relations between clubs and players in the sense of Article 101. By way of example, a Romanian football club registering a 21-year old player trained in Romania as a professional for the first time, would end up paying the training club a significantly lower amount of training compensation than a Hungarian club of the same category, wishing to sign that same player. The reason for that is that whilst in the first scenario the Romanian club would be subject to the internal training compensation mechanism; in the second scenario, the Hungarian club would be subject to the FIFA regulations that impose higher training compensations.
With these premises in mind, the testing of article 6(3) Annexe IV of the FIFA RSTP under EU competition law seems appropriate, although the application of EU competition law in this type of cases will probably remain an exception.[22]
In short, Article 101 TFEU[23] prohibits agreements, decisions of associations and concerted practices which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion within the internal market.[24] Saskia King, explaining the so-called “objective criterion”[25], has highlighted that “when determining whether an agreement restricts competition under Article 101(1) TFEU, ‘object’ expresses a true alternative to ‘effect’ and as such requires separate consideration”. Therefore, if the object of the agreement is anticompetitive, there is no need to look behind the effects.
A primary aspect of competition law is the identification of the relevant market where a possible anticompetitive practice takes place. In the present context, the relevant market is the transfer market of football players, that is, the market on which the offer and supply of players meets and clubs compete against each other to recruit the best players.[26] Geographically speaking, the market is limited to the territory of the Member States of the EU.
Assuming also, that the FIFA RSTP (ed. 2016) qualifies as a “decision by an association of undertakings”[27] and that the rules of training compensation have an appreciable affect in trade between Member States[28] since any change of clubs for players under the age of 23 requires the payment of a training compensation[29]; the questions left to answer are therefore, whether or not article 6(3) of Annexe IV of the FIFA-RSTP (Ed. 2016), in its current formulation is (1) likely to prevent, restrict or distort competition in the EU transfer market of football players under Article 101(1) TFEU and more importantly, (2) whether the restrictive effects are proportionate and “[reasonably] necessary for the organization and proper conduct of sport?”[30]
As to the first question, it is my view that both the object and the effects produced by, article 6(3) restrict and distort competition between clubs, for they discriminate former clubs vis-à-vis previous clubs with regard to their right to claim training compensation. Additionally, the compensation limits the ability of clubs to take on players acting as free agent.
As to the second question, the Meca-Medina case –though in a different context[31]- offered valuable guidance to test the compatibility of rules of sports associations with EU competition law: “42. Not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 81(1) EC. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects and, more specifically, of its objectives. It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives (Wouters and Others, paragraph 97) and are proportionate to them.”
Following the Meca-Medina reasoning, and focusing on the rationale behind article 6(3) Annexe IV, in the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC, the CAS Panel corrected the view of the original DRC decision of 27 April 2006. Specifically, it remarked that the aim of the rule is “to ensure that no player, whether amateur or professional, in whom the training club has no interest, is impeded to accept the offer of another club because he carries some sort of ‘compensation price tag”[32] rather than to penalize clubs failing to offer a contract to their amateur players. The unquestionably legitimate goal of “the exception to the exception” - as the Panel calls article 6(3) - is thus to limit the obstacles to the free mobility of players aforementioned.
However, as to “whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives and are proportionate to them” there cannot be a positive answer. To me it is doubtful whether the anticompetitive effects produced by establishing different conditions between former clubs and previous clubs are inherent or a necessary consequence to ensure the objective of rule (i.e. contributing to free mobility). I believe the contrary to be true. (i.e. uently,conditions ctive of the rule, tt of EU Law. by scholars.r compensation. in the application of such principle. nsatI bI be The effects generated by the current interpretation of article 6(3) collide with the aim of the rule (i.e. protecting free mobility), for reinstating previous clubs in their rights to claim training compensation irrespective of their behaviour vis-à-vis the player, compromises free movement within the EU and creates unfair competitive advantages for previous clubs.
In conclusion, my suggestion is to rethink, the current formulation of article 6(3) (if not the entire training compensation system) and correct its detrimental effects by preventing all previous clubs that fail to offer players a professional contract or to show bona fide interest as from the season in which a player turns 16 years old from requesting training compensation. It is certainly not the role of the CAS to do so, but the responsibility of the EU Commission to take an active lead to ensure full compliance of football regulations with EU law. 

[1] See FIFA Executive Committee, “Commentary on the Regulations for the Status and Transfer of Players”, Annex 4 (29 June 2005) at page 124.

[2] European Commission Press Release of 5 March 2001, “Outcome of discussions between the Commission and FIFA/UEFA on FIFA Regulations on international football transfers”.

[3] A bona fide and genuine interest in keeping the player must be demonstrated before the DRC cf. Arbitration CAS award 2009/A/1757 MTK Budapest v. FC Internazionale Milano S.p.A., award of 30 July 2009.

[4] FIFA Regulations on the Status and Transfer of Players, article 6(3) Annexe IV.

[5] In cases of subsequent transfer, the club entitled to claim training compensation will always be the “former club”.

[6]“17. As noted earlier, it is the 2005 Regulations which apply in the present case. At the same time, however, FIFA itself has clarified that the aim of the revisions introduced in 2005 was simply to “facilitate the evidence of a contract offer being made”. In its Decision, the DRC stated that “...when revising the Regulations it was decided to integrate in the 2005 edition of the Regulations some formal preconditions in order to facilitate the evidence that a contract offer was effectively made...This is the actual aim of the relevant formalities”. Consequently, the Panel does not interpret the 2005 revisions to the Regulations as constituting a substantive or material alteration to the 2001 regulatory regime because, as FIFA has said, the changes introduced related only to matters of form, and not of substance.”

[7] See para. 31 of the award. Although, the transfer structure used in this case could qualify as a bridge transfer used for the purpose of circumventing the FIFA regulations on transfer compensation.

[8] Decision of the Single Judge of the Sub-committee of the DRC case Budapest Honved FC (Hungary) v. AFC ASA 2013 Targu Mures (Romania) ref. TMS 243. Unpublished.

[9] See also FIFA RSTP, article 2 para. 2 of Annex IV.

[10] See the CAS award 2007/A/1363 TTF Liebherr Ochsenhausen v/ETTU, award of 5 October 2007 para 12 page 8: “10. By interpreting rules and regulations of associations, the starting point and the predominant element of construction is the wording (literal interpretation). Other elements such as the systematic context, the purpose and the history of the rule may contribute to the correct understanding of the meaning of the rule. This principle is accepted in both civil and common law and it has been constantly applied by CAS panels. It is also embedded in the law of Luxembourg (see, e.g., Art. 1156 of the Code Civil of Luxembourg) and the parties have not argued otherwise.” Emphasis added.

[11] Decision not published.

[12] De Weger, The Jurisprudence of the FIFA Dispute Resolution Chamber, Asser Press, 2^nd Edition, 2016. Page 401.

[13] See para. 22 of the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC, award of 7 February 2007.

[14] See also Case 36/74, Walrave and Koch v UCI, ECLI:EU:C:1974:140.

[15] Case C-415/93, Union Royale Belge des Sociétés de Football Association and Others v Bosman and Others, ECLI:EU:C:1995:463, paras. 106-110.

[16] See FIFA Executive Committee, “Commentary on the Regulations for the Status and Transfer of Players”, article 1(2) and Annex 4 para. 1 (Objectives), page 112.

[17] S. Weatherill, European Sports Law Collected Papers, Asser Press, 2^nd Edition (2014), pages 218 and 219.

[18] See Report from the Commission to the European Council of 10 December 1999 with a view to safeguarding current sports structures and maintaining the social function of sport within the Community framework – The Helsinki Report on Sport - para. 4.2.1.3: The Report refers to a system of objectively calculated payments that are related to the costs of training.

[19] Case C-325/08, Olympique Lyonnais SASP v Olivier Bernard and Newcastle UFC, ECLI:EU:C:2010:143, paras. 44 and 45.

[20] As an example of this disproportionality, a simple comparison between the training costs established for Cat. III UEFA clubs (30.000 Euro per) with the training costs established for internal transfers by the Romanian Football Football Federation (5.000 RON per year equivalent to 1.107 Euro).

[21] Training compensation rules were recently tested against EU law, and in particular with regard to the freedom of movement of workers, by TAS-CAS in the Riverola case (CAS award 2014/A/Bologna FC 1909 SpA v. FC Barcelona). The award is not public, but a full comment and legal analysis is published in: Luca Smacchia, “The Riverola case: how the enforcement of FIFA rules may restrict the freedom of movement for workers within the EU”, Football Legal, #5 (June 2016), pages 20-24.

[22] See e.g. Ben Van Rompuy, “Sport and EU Competition Law: New developments and unfinished business”, Asser International Sports Law Blog (22 May 2015).

[23] Article 101 TFEU: “The following shall be prohibited as incompatible with the internal market: 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 competition within the internal market, and in particular those which: (…) (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;”

[24] “The distinction between "restrictions by object" and "restrictions by effect" arises from the fact that certain forms of collusion between undertakings can be regarded, by their very nature, as being injurious to the proper functioning of normal competition.” - Commission Staff Working Document of 25 June 2014, Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the De Minimis Notice, page 3.

[25] Saskia King, “Agreements that restrict competition by object under Article 101 (1) TFEU: Past, present and future”, PhD Thesis – The London School of Economics and Political Science (2015), Page 28.

[26] “The combined investment of summer and winter transfer windows in the top five European leagues was almost €3.4 billion. That was up by 29 per cent versus last season and again a record high ever.” - Soccerex Transfer Review Winter Edition 2016, Prime Time Sport, page 4.

[27] See, for example, Case T-193/02, Piau v. Commission, ECLI:EU:T:2005:22, para. 69: “As regards, first, the concept of an association of undertakings, and without it being necessary to rule on the admissibility of the arguments put forward by an intervener which go against the claims made by the party in support of which it is intervening, 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 within the meaning of that provision.”

[28] For an in-depth economic data analysis see, e.g., FIFA T.M.S., Global Transfer Market 2012 Highlights, pages 14 and 15 – Overall Market Activity - and pages 23 and 24 - Player Age.

[29] David Nilsson, “The Revised FIFA Regulations for the Status and Transfers of Players’ Compatibility with EU competition law – the Transfer System revised”. Master Thesis. Faculty of Law - University of Lund, (September 2006).

[30] Supra, 30.

[31] Doping rules under EU competition law.

[32] See para. 20 page 7 of the award: “The Panel does not share the DRC’s view that the purpose of the first sentence of Article 6 para. 3 is to penalise clubs which do not offer professional terms to their amateur players. Rather, in the Panel’s opinion, the purpose of the above provision is to ensure that no player, whether amateur or professional, in whom the training club has no interest is impeded to accept the offer of another club because he carries some sort of “compensation price tag”.

The selling of media rights is currently a hot topic in European football. Last week, the English Premier League cashed in around 7 billion Euros for the sale of its live domestic media rights (2016 to 2019) – once again a 70 percent increase in comparison to the previous tender. This means that even the bottom club in the Premier League will receive approximately €130 million while the champions can expect well over €200 million per season.

The Premier League’s new deal has already led the President of the Spanish National Professional Football League (LNFP), Javier Tebas, to express his concerns that this could see La Liga lose its position as one of Europe’s leading leagues. He reiterated that establishing a centralised sales model in Spain is of utmost importance, if not long overdue.

Concrete plans to reintroduce a system of joint selling for the media rights of the Primera División, Segunda División A, and la Copa del Rey by means of a Royal Decree were already announced two years ago. The road has surely been long and bumpy. The draft Decree is finally on the table, but now it misses political approval. All the parties involved are blaming each other for the current failure: the LNFP blames the Sport Governmental Council for Sport (CSD) for not taking the lead; the Spanish Football Federation (RFEF) is arguing that the Federation and non-professional football entities should receive more money and that it should have a stronger say in the matter in accordance with the FIFA Statutes;  and there are widespread rumours that the two big earners, Real Madrid and FC Barcelona, are actively lobbying to prevent the Royal Decree of actually being adopted.

To keep the soap opera drama flowing,  on 30 December 2014, FASFE (an organisation consisting of groups of fans, club members, and minority shareholders of several Spanish professional football clubs) and the International Soccer Centre (a movement that aims to obtain more balanced and transparent football and basketball competitions in Spain) filed an antitrust complaint with the European Commission against the LNFP. They argue that the current system of individual selling of LNFP media rights, with unequal shares of revenue widening the gap between clubs, violates EU competition law.

Source:http://www.gopixpic.com/600/buscar%C3%A1n-el-amor-verdadero-nueva-novela-de-televisa/http:%7C%7Cassets*zocalo*com*mx%7Cuploads%7Carticles%7C5%7C134666912427*jpg/

The complaint will surely be frowned upon in Brussels. First, Spain is on the verge of introducing a joint selling arrangement. So what is the point of using competition law as an instrument to obtain … a joint selling arrangement? Second, the argument that a horizontal agreement, preventing LNFP clubs from individually competing in the sale of their media rights, is needed to ensure fair and effective competition seems, to put it mildly, counterintuitive. Third, who files an antitrust complaint on 30 December?

The complainants essentially target the polarization of revenues between the two top clubs (Real Madrid and FC Barcelona) and the other clubs. This is a well-known and long-standing feature of the LNFP, which is only in part attributable to disparities in the clubs’ media rights income. The complainants point out, however, that media coverage is also an important driver of other main revenue streams (e.g. value of sponsorship deals, ticket sales, and merchandising). 

Since the end of the 1990s, clubs have been selling the LNFP media rights individually. In a system of individual selling, a club’s bargaining power is evidently determined by the market potential of the matches of a specific club and not by the collective attractiveness of the competition as a whole. This has resulted in a pronounced imbalance between the two top clubs Real Madrid and FC Barcelona, who are able to extract supra-normal profits, and the other clubs.

For the 2010-2011 season, for example, the two Spanish giants both received around €125 million for their live media rights, leaving their domestic peers fighting over the scraps (i.e. the next biggest clubs earned around €40 million and the majority of the clubs sold their rights for about €15 million). In other words, Real Madrid and FC Barcelona generate ten times more revenue from their media rights as compared to the smaller clubs.

While it is easy to see why this situation may be considered unfair from the perspective of the majority of the clubs, it is less evident to find a competition law problem. 

A competition law perspective 

As stated above, the complaint is launched against the LNFP who, according to FASFE, by means of authorising the individual selling of TV rights system, is violating EU competition law.

First, the complainants argue that the system of individual selling strengthens the dominant positions of Real Madrid and FC Barcelona and, subsequently, undermines the competitive position of the other clubs. So far so good. But then they jump to the conclusion that Article 102 TFEU is being violated, not by the LNFP, but by Real Madrid and FC Barcelona. 

There they lost us – and presumably anyone remotely familiar with EU competition law. But let’s be a good sport and contemplate this line of reasoning a bit further.  

It might be argued that Real Madrid and FC Barcelona hold a (collective) dominant position on certain product markets in Spain and, by extension, in a substantial part of the internal market – even though the complaint fails to properly define those relevant markets. On the upstream market for the acquisition of media rights of La Liga, both clubs behave to a certain extent independently of their competitors. Spanish broadcasters first seek to acquire the media rights to their matches, which undercuts the bargaining position of the other clubs in the subsequent negotiations for the purchase of their rights. A more fundamental flaw is that the complainants contend that the possession or even strengthening of a dominant position by way of competition falls within the prohibition of Article 102 TFEU. The complaint does not put forward a single argument substantiating how both clubs engage in abusive conduct. 

Second, the complainants argue that the LNFP, according to Article 49 of its statutes, must look after the common interests of the competitions that it organises and of its members. In their view, the 1996 decision of the LFNP General Assembly to re-introduce a system of joint selling, which has negatively affected the majority of clubs and a large majority of fans, does not comply with this objective. 

While it can be argued that the LNFP’s decision constitutes a decision of an association of undertakings within the meaning of Article 101(1) TFEU, it is difficult to see how it has an anti-competitive object or effect. Quite on the contrary, the decision lifted the competitive constraints on the clubs’ independent decision-making that were in place up until the season 1997-1998. 

It should be noted that a system of joint selling of media rights does not necessarily bring about an equitable distribution of the revenues among the clubs. Albeit connected, the distribution mechanism is a separate measure, which is typically for the most part performance-based. Moreover, financial solidarity can also be implemented through other mechanisms, such as a taxation system or the redistribution of voluntary contributions. That said, it must be acknowledged that a system of joint selling does facilitate the sharing of revenues among clubs. The ability of sports organisers to impose alternative financial solidarity mechanisms might be constrained by the pressure of the larger clubs (which evidently wish to see a larger share of the revenues flow back to them because they are primarily responsible for generating these revenues). The clubs’ media rights income ratio in the other top European football leagues, where media rights are sold collectively, illustrates this point. In the season 2011-2012 the earnings ratio of the top to the bottom club was as follows: Premier League (1,55 to 1); Serie A (4,35 to 1); Bundesliga (2,3 to 1); and Ligue 1 (3,2 to 1).[1] 

Considering that joint selling only creates incentives for horizontal solidarity, the financial solidarity justification in itself could not outweigh the anti-competitive effects of a joint selling arrangement. The restrictions of competition are considerable. First, joint selling agreements prevent clubs from individually competing in the sale of their media rights. Access to the market can therefore be foreclosed to competing buyers. Second, joint selling leads to uniform prices and other trading conditions. Price-fixing is a hard-core restriction that is normally prohibited. Third, joint selling could lead to output restrictions when certain rights are withheld from the market. 

As the discussion of the competition law decisional practice below will demonstrate, it is even unclear whether the financial solidarity argument can be invoked as a partial legal defence against the prohibition of restrictive agreements. 

The financial solidarity conundrum

One of the key assumptions underlying the complaint is that the EU institutions advocate the joint selling of media rights. This is presumably one of the main reasons why they are turning to Brussels for help. While it is true that the European Council (e.g. in the 2001 Nice Declaration) and the European Parliament have always been supportive of the link between joint selling and the principle of financial solidarity, the same cannot be said about the European Commission. In policy documents, the Commission has refrained from making (strong) pronouncements on the solidarity benefits of joint selling vis-à-vis individual selling. In the Helsinki Report on Sport (1999) the Commission underscored the need to examine the precise link between the joint selling of media rights and financial solidarity between professional and amateur sport. In its White Paper on Sport (2007) the Commission acknowledged that joint selling “can be a tool for achieving greater solidarity within sports”, but immediately added that also a system of individual selling by clubs can be linked to a robust solidarity mechanism. Only in the Communication on Developing the European Dimension of Sport (2011) the Commission expressed some general support for a system of joint selling. Surely some of the Commission’s press releases coinciding its decisions in this area mention benefits for financial solidarity (see e.g. here). If the complainants had looked at the actual decisions, however, they would have realised that that rhetoric is inconsistent with the legal argumentation.

After the need to address competition issues in relation to joint selling arrangements for football media rights emerged in the 1990s, several National Competition Authorities (NCAs) found that the system was incompatible with the national competition rules. The NCAs were sceptical about the necessary link between joint selling and revenue distribution and, subsequently, did not consider it to be a pro-competitive benefit capable of offsetting the identified restrictive effects. Even though the NCAs spoke out uniformly against the joint selling of football media rights, in three Member States their decisions were either overruled by a national court (United Kingdom) or circumvented through legislative action (Germany) or executive orders (the Netherlands).[2] This created uncertainties regarding the circumstances under which joint selling could be considered compatible with EU and national competition law. 

In the UEFA Champions League decision (2003) the European Commission for the first time assessed the compatibility of the joint selling of football media rights with Article 101 TFEU. In two subsequent decisions, German Bundesliga (2005) and FA Premier League (2006), the Commission raised similar competition concerns and imposed similar remedies to address these concerns. 

In all three decisions, the Commission found that joint selling arrangements are caught by the prohibition of Article 101(1) TFEU, but may create substantial efficiency gains so that Article 101(3) TFEU could be invoked as a legal defence. It identified three main benefits: (1) the creation of a single point of sale (which creates efficiencies by reducing the transaction costs for sports organisers and media content operators); (2) branding of the output by one entity (which creates efficiencies as it helps the media products receive wider recognition and distribution); and (3) the creation of a league product focused on the competition as a whole rather than individual clubs. 

To ensure that the efficiency benefits outweigh the toxic cocktail of anti-competitive effects (i.e. price-fixing and considerable risks of market foreclosure and output restrictions), the Commission carefully prescribed the way in which the rights must be marketed by imposing a list of behavioural remedies. 

In all three of the Commission’s investigations, the parties put forward the financial solidarity argument as the main justification for an exemption of their joint selling arrangements under Article 101(3) TFEU.[3] Yet the Commission never substantially addressed that argument. Only in the UEFA Champions League decision, the point was briefly considered. The Commission simply noted that UEFA had failed to substantiate the indispensability of a joint selling agreement for the redistribution of revenue and, subsequently, for the organisation of the Champions League.[4] Since it could exempt the joint selling agreement on economic efficiency grounds, however, the Commission concluded that “it is not necessary for the purpose of this procedure to consider the solidarity argument any further”.[5] As such, the Commission conveniently got round the issue.

The national decisional practice subsequent to the Commission’s precedents equally refrained from addressing the issue. The NCAs started focusing their assessments exclusively on efficiency benefits, as instructed by the Commission.  

In short, in competition law proceedings related to joint selling arrangements, the financial solidarity defence has never been very compelling – it was either considered unsound (early national enforcement practice) or remained unaddressed. Of course, one may still argue that the elephant in the room was surreptitiously taken into account (bearing in mind that the acceptance of a similar price-fixing cartel in other sectors would be difficult to imagine).[6] 

Redistribution formulas for media rights income  

After the European Commission de facto legitimized the joint selling of football media rights, the system became the common practice for marketing such rights in Europe. Since Italy reintroduced the system of joint selling in 2010, Cyprus, Portugal, and Spain are now the last EU markets in which first division football clubs sell their rights individually. 

To put the distribution key foreseen in the pending Spanish Royal Decree into perspective, we will first summarize how the other four big European leagues redistribute the media rights income. 

England: Since 1992, the year in which the Premier League was formed, it was decided that 50% of the revenue is split equally between the 20 clubs, 25% is paid in Merit Payments (depending on where a club finishes in the final League table), and the final 25% is paid in Facility Fees (based on each time a club’s matches are broadcast in the UK). All international broadcast revenue, and central commercial revenue, is split equally amongst the 20 clubs. For the season 2013/2014, the ratio between the top (Liverpool at €132 million Euros) and the bottom earning club (Cardiff City at €84 million) was 1.57:1.

Germany: Within the German Bundesliga clubs, the criteria for the distribution of revenues will be determined by a 2:1 ratio between the top-ranked and the bottom-ranked teams in an ad hoc distribution ranking for the years 2013 – 2017. This means that the revenue sharing distribution will range from a maximum of 5.8% of the total amount for the first place team to at least 2.9% for the 18th place team. The Bundesliga’s international media rights income distribution, however, remains based on both international and domestic sport performance.

Italy: Italy’s Serie A joint selling system had an earnings ratio of the top to bottom club of 5.25:1 for the season 2013/2014. Juventus, the top earning club, had an income from TV rights of €94 million, whereas the bottom earning club, Sassuolo, of €17.9 million.[7] Out of the total amount distributed, 40% is distributed to all the clubs as a fixed amount. Furthermore, 30% is distributed on the basis of past results (15% on results during last five seasons, 10% on historical results[8], and 5% on last season’s final league position); and 25% according to club supporters base.  

The planned Royal Decree in Spain will have a distribution system that guarantees Real Madrid and FC Barcelona an amount that is very close to what they earn now. The income ratio of the clubs will start at 4:1 and diminishes as the total amount of income increases. From the total income, about 3% will be deducted for the Spanish FA and for non-professional sports. Additionally, 10% will be assigned to the Second Division. The remaining amount will be distributed as follows: 50% as fixed amount for all the clubs, 25% depending on sports results while taking into account historical results. The other 25% will be distributed in relation to public awareness similar the Italian system (calculated on the basis of TV audiences, city population, and number of fans of the club).  

Conclusion

It is safe to say that the competition complaint launched by FASFE will not lead to the European Commission opening a formal investigation. The complainants fail to demonstrate how the current Spanish individual selling system breaches, or even potentially breaches, Article 101 and/or 102 TFEU. In that regard, it should be noted that they already tried their luck with the national competition authority (CNC), alleging infringements of national competition law. On 8 January 2013, the CNC decided to reject the complaint because it only prescribed the results of the current media rights sales process without demonstrating violations of the national competition rules. 

Whether FASFE is aware of the same judicial inaccuracies in its Commission complaint is unknown. On the other hand, it is quite evident that invoking competition law to argue for the introduction of a cartel with significant anti-competitive effects is paradoxical. The ex post fairness (i.e. the outcome of market competition) that FASFE is looking for is quite different from the ex ante fairness in the market place that competition policy is concerned with. One can therefore interpret the complaint as an attempt to add pressure on the involved Spanish parties (the CSD, the LNFP, and the RFEF) to introduce the new Royal Decree once and for all. Although the Spanish public is provided daily episodes full of jabbering, backstabbing and other drama, as with all Telenovelas, the soap is dragging on and on and should have ended ages ago. 

Whether the switch to a joint selling arrangement will significantly improve the competitive balance in La Liga remains to be seen. Since FC Barcelona and Real Madrid are guaranteed an amount similar to what they receive now, this will ultimately depend on how much the total income from the sale of the media rights will increase. The inexorable rise in the value of the broadcasting deals in the UK, which is the unique result of a duopoly of two powerful deep-pocket players (i.e. the incumbent dominant pay-TV operator Sky and new market entrant BT) that emerged after the introduction of the “no single buyer” obligation, cannot be realistically expected – at least not in the short term. Yet it is relatively certain that the overall income from media rights will go up – ultimately to the benefit of all the clubs. A (minimum) earnings ratio of the top to bottom club of 4:1 is not overly ambitious, but surely is a welcome step towards remedying the current imbalance between the two top clubs and their less fortunate competitors.

[1] See T.M.C. Asser Institute and Institute for Information Law, “Study on Sports Organisers' Rights in the EU”, Commissioned by the European Commission, DG Education and Culture, February 2014.

[2] Idem.

[3] See e.g. Commission, “Case No IV/37.214 - DFB - Central marketing of TV and radio broadcasting rights for certain football competitions in Germany” (Notice) (1999) OJ C/610, para. 7; Commission, “Notice published pursuant to Article 19(3) of Council Regulation No 17 concerning case COMP/C.2/38.173 and 38.453 - joint selling of the media rights of the FA Premier League on an exclusive basis” (2004) OJ C 115/3, para. 10.

[4] UEFA Champions League (Case COMP/37.398) Commission decision 2003/778/EC (2003) OJ L291/25, para. 131.

[5] Idem, para. 167.

[6] See e.g. Giorgio Monti, “Article 81 EC and Public Policy” (2002) 39 CMLR 1057 (calling it a “sector-specific exemption”).

[7] FASFE Antitrust Complaint of 30 December 2014, page 11

[8] In other words, this revenue is determined by overall league placings since 1946. In this category, Juventus, AC Milan and Inter Milan are the top earning clubs. For more info see: http://www.financialfairplay.co.uk/latest-news/tv-revenue-distribution-%E2%80%93-comparing-italian-and-english-models.