The economic and legal aspects of g p transfers of players - - PowerPoint PPT Presentation

The economic and legal aspects of g p transfers of players Results of the study

Didier PRIMAULT and Christophe LEPETIT Friday, 8th March Sport Directors meeting Dublin Sport Directors meeting, Dublin

Objectives and scope of the study

Objectives Objectives

Objectives and scope of the study

Objectives Objectives

• To provide a comprehensive analysis of the legal aspects of the

transfers of players (legal framework). transfers of players (legal framework).

• To understand the economics of transfers and assess their

weight at EU level.

• To explain how transfers actually work.

p y

• To make recommendations regarding transfers in Europe.

Scope Scope

• The 27 countries of the EU.
• Two

sports: football and basketball (in fact especially football).

General framework

Characteristics of the economics of professional sport Characteristics of the economics of professional sport

General framework

Characteristics of the economics of professional sport Characteristics of the economics of professional sport

• A unique situation in economics: competitors (clubs) have to

agree to produce produce together together (the match) without it being a strategic agree to produce produce together together (the match), without it being a strategic choice.

• Sporting

Sporting opponents

• pponents – clubs – must be economic

economic partners partners.

• Sporting

Sporting opponents

• pponents

clubs must be economic economic partners partners.

• The value of the product derives, in particular, from its

uncertainty uncertainty, but it also needs to ensure: uncertainty uncertainty, but it also needs to ensure:  The The integrity integrity of

• f competitions

competitions  The The fairness fairness of

• f competitions

competitions p

General framework

A booming economy subject to significant challenges A booming economy subject to significant challenges

General framework

g y j g g g y j g g

• Continued growth

growth in revenues since the 80s (for the main markets)

• A debt

debt crisis crisis which threatens financial stability in the sector (football and basketball).

• Threat of criminal

criminal activities activities (trafficking, corruption, fraud, abusive t f l t t ) terms of employment, etc.).

• New forms

forms of

• f investment

investment in clubs (LBO, Sugar daddies) and in players (third party ownership) players (third-party ownership).

Selected examples income growth Selected examples – income growth

Broadcasting Sponsorship Ticketing incomes Commercial revenues Total revenues €2 30 €2847 €10 034 €11 393 €11 995 €12 797

TCAC 5.6%

€2317 €2549 €2571 €2606 €1697 €1785 €2007 €2130 €2847 €9032 €10 034

TCAC 7.2% TCAC 0.7%

€2448 €2576 €2848 €3063 €3179 €2059 €2317

TCAC 5.2%

€2828 €3358 €3989 €4231 €4516

TCAC 8.2%

2007 2008 2009 2010 2011

Source : UEFA

Selected examples top division net profit Selected examples – top division net profit

0 00 2007 2008 2009 2010 2011 0 40

• 0,20

0,00

• 0,60
• 0,60
• 0,60
• 0,40

1 20

• 1,00
• 0,80
• 1,20

1 60

• 1,40
• 1,20
• 1,60
• 1,70
• 1,80
• 1,60

Source : UEFA

PLAN PLAN

THE LEGAL FRAMEW ORK AND ECONOMI C REALI TY OF TRANSFERS I N EUROPE REALI TY OF TRANSFERS I N EUROPE I SSUES AND RECOMMENDATI ONS

PART 1 OVERVIEW OF TRANSFERS OF PLAYER IN EUROPE

• A. Legal framework
• B. Economic reality

A Legal framework

1. 1. Justification for transfers Justification for transfers

• A. Legal framework

The necessity of maintaining maintaining fair fair and and balanced balanced competition competition can justify restrictions on free movement of players, and these are organised notably into transfer rules.

• Firstly, the principle is to sign short

short term term contracts contracts.

• Secondly transfer rules are a derogation

derogation from from normal normal practices practices in

• Secondly, transfer rules are a derogation

derogation from from normal normal practices practices, in the following ways:  They limit freedom of players during their contract to move y p y g from one employer to another and set restrictive conditions for such moves.  In order to prevent a total ban on players’ mobility, they establish a system of transfer fees between clubs, when the contract is broken.

A Legal framework

2. 2. Transfer rules in the EU Transfer rules in the EU

• A. Legal framework
• Two

Two categories categories of

• f regulation

regulation have to be differentiated:  Sports bodies’regulations (private).  Public law and rules.

• They may be drawn up at the national

national or the international international level.

• This diversity and complexity can raise the question of how

how all all these these rules rules are are compatible

• compatible. However, except in certain special circumstances,

the study did not highlight major problems.

A Legal framework

• A. Legal framework

2. 2. Transfer rules in the EU Transfer rules in the EU

• Sporting bodies’ regulation

 The overall framework is defined defined by by the the International International y Federations Federations.  It is imposed on the National Federations, which can nevertheless make specific provisions, if required. p p q

A Legal framework

• A. Legal framework

2. Transfer rules in the EU

• Public law and rules:

 There is little little impact impact made made by by national national public public law law.  On the other hand, European European law law has has a a significant significant impact impact on the development of regulations (the Bosman and Lethonen cases, ) etc.).

A Legal framework

• A. Legal framework

3. 3. The agreement of 5th March 2001 The agreement of 5th March 2001

• An agreement

 Negotiated Negotiated between the different stakeholders (EC FIFA  Negotiated Negotiated between the different stakeholders (EC, FIFA, UEFA, FIFPro).  Under the pressure of the EC.  Led to a radical reform reform of the transfer system in football. Led to a radical reform reform of the transfer system in football.

• Five

Five important important modifications modifications:  Contractual stability (transfer windows, duration of contract) y ( , )  Youth development and protection of minors  Solidarity mechanism  Training compensation g  Dispute resolution mechanism

B Economic reality

• B. Economic reality

1. 1. Transfer weight assessment in football Transfer weight assessment in football g

• At the European level, an exponential

exponential growth growth in the number and value of transfers since the 1990s (liberalisation of the labour market and the explosion in revenue by professional clubs).

• The number of transfers has multiplied

multiplied by 3.2; their value by 7.4 since 1995.

• The weight was estimated at more

more than than € €3 3bn bn in in 2010 2010/ /11 11 at the E l l (d ti t f ithi EU t i d i t ti l European level (domestic transfers within EU countries and international transfers between EU countries).

B Economic reality

• B. Economic reality

18307 3500 20000

Transfer weight in football

15952 18307 2500 3000 3500 16000 18000 20000 8531 2000 2500 10000 12000 14000 5735 8531 1000 1500 6000 8000 403 1705 1952 3002 500 2000 4000 1994/95 1999/2000 2005/06 2010/11 Value (€m) Number of transfers

B Economic reality

• B. Economic reality

1. 1. Transfer weight assessment in football Transfer weight assessment in football

• Two

Two distinct distinct periods periods since1995:  1995/2002: a speculative speculative and and inflationary inflationary logic.  2002/11: return to a“sporting sporting”logic.

• Explanatory factors

 External External economic factors(crisis).  Internal Internal factors (2001 agreement and FFP)  Internal Internal factors (2001 agreement and FFP).

B Economic reality

• B. Economic reality

2. Transfer weight assessment in basketball

• A completely different reality:

 Contract rarely exceeds a sports season.  Then, very few transfers fees.  Contractual stability in less a problem than squads instability (high turnover).

• At the global level, a market whose weight is €12m - €16m, i.e. 6 to 7

i l h h f f f j C i i R ld (M h times less than the transfer fee for just Cristiano Ronaldo (Manchester United  Real Madrid, €94m).

Selected example: basketball player careerpath Selected example: basketball player career path

Source : CIES

• B. Economic reality

2. National economic mapping

• Two categories of country:
• Two categories of country:

 Countries importing sports talent (England, Germany, Spain, Italy, Austria, Greece, Romania, Cyprus).  Countries exporting (trainers) sports talent (France, Netherlands, Scotland, Portugal, Hungary...).

• A variable impact on the overall economy of clubs:

 For some countries, the economic impact is significant: , p g  England, Spain, Italy very negative impact  Netherlands, Portugal  very positive impact  For others, this activity is more neutral (Germany, Scotland, Denmark...).

• B. Economic reality

2. 2. National economic mapping National economic mapping – – different profiles of countries different profiles of countries

Source : CIES

• B. Economic reality

2. 2. National economic mapping National economic mapping – – different profiles of countries different profiles of countries

Source : CIES

• B. Réalité économique

q

2. 2. National economic mapping National economic mapping – – different profiles of countries different profiles of countries

Source : CIES

• B. Economic reality

3. 3. A highly segmented and strongly concentrated market A highly segmented and strongly concentrated market  Higher primary market: the market for stars market for stars

 Players

Players in this segment are in a position of strength a position of strength versus y g p g p g clubs (monopoly)  Secondary market: the foot foot-

• soldiers

soldiers  In this segment, clubs clubs are more in a position of strength position of strength versus players (oligopsony) This difference in situation has a strong impact on transfer conditions (fees and salaries etc ) and on players controlling their careers and salaries, etc.) and on players controlling their careers.

Selected example: football player career path

Source : CIES

• B. Economic reality

3. 3. A highly segmented and strongly concentrated market A highly segmented and strongly concentrated market A concentration in a:

• Limited

Limited number number of

• f transfers

transfers: for the Big-5 (England, Germany, France, Italy and Spain), 10% of the transfers made in 2010/11 as part of a breach of contract involving the payment of a fee, generated about 50% f f f id b ll l b

• f transfer fees paid by all clubs.
• Limited

Limited n mber n mber of

• f cl bs

cl bs ( ill t t d b l )

• Limited

Limited number number of

• f clubs

clubs (as illustrated below).

Real Madrid FC Barcelone

8% 19%

Manchester United Bayern Munich Arsenal Chelsea

Concentration: some illustrations

AC Milan Internazionale Liverpool h lk

3 9 %

Chelsea spendings on transfers as a part of the total in EPL

33%

Schalke 04 Tottenham Hotspur Manchester City

20% 25% 30% 35% 40%

3 9 % 3 2 % 1 8 % 1 7 % 1 8 % 1 6 %

Juventus Olympique de Marseille

0% 5% 10% 15% 20%

7 % 4 % 5 %

AS Roma Borussia Dortmund Olympique Lyonnais y p q y Hamburger SV Valencia Napoli p

PART 2 ISSUES AND RECOMMENDATIONS ISSUES AND RECOMMENDATIONS

5 j i h b id tifi d

• A. ISSUES

5 major major issues issues have been identified: 1. A very significant and badly badly-

• controlled

controlled development development of the transfer market market. 2. A lack lack of

• f transparency

transparency in the market which make many abuses possible (e g the development of third-party ownership) possible (e.g. the development of third party ownership). 3. A system which does not manage to fight effectively against competitive competitive imbalances imbalances (see below). competitive competitive imbalances imbalances (see below). 4. 4. Dispute Dispute resolution resolution mechanisms mechanisms that could be improved. 5. A still imperfect imperfect cooperation cooperation between stakeholders

• A. ISSUES

• B. Recommendations

Should we remove transfer fees or try to improve the system? Should we remove transfer fees or try to improve the system?

• G tti

id f t f f i t l ti l ti b f th f ll i

• Getting rid of transfer fees is not

not a solution solution because of the following consequences: 1 Redistributive effects would stop 1. Redistributive effects would stop. 2. Training of youth talent could be less attractive. 3. More power for stars and major clubs; more precarious for players in the secondary segment players in the secondary segment.

• Therefore,

Therefore, the the system system should should be be improved improved. .

• B. Recommendations

How to improve the transfer system ? 5 lines of action How to improve the transfer system ? 5 lines of action How to improve the transfer system ? 5 lines of action. How to improve the transfer system ? 5 lines of action. 1. 1. Limit Limit transfer fees. 2. Improve fair and balanced competition through better and increased increased redistribution redistribution between clubs as well as control control over financial transactions and accounting linked to transfers. 3. Improve governance through transparency transparency and fair fair dispute dispute resolution resolution mechanisms mechanisms. 4. Support youth youth development development and and protection protection of

• f minors

minors. D l i i h bli h i i f b l d 5. Develop cooperation cooperation with public authorities for better law and transfer rules’enforcement.

Limit transfer fees – 2 proposals

1. Limit excesses in transfer fees after after contract contract extension

• extension. Such limit

aims to avoid the possibility for clubs to extend the protected p y p period with a view to trigger the payment of transfer fees. The system could provide for the transfer fee to be capped at 70% of the gross salary owed by the club to the player for the entire period

• f his contract;

2. Regulate the use of “buy buy-

• out
• ut clauses

clauses” to prevent abusive practices and to establish objective criteria.

Improve fair and balanced competition 7 proposals p p

1. Establish a “fair fair play play levy levy” on transfer fees beyond a certain amount. 2. Better publicise the movement of players to ensure ensure that that solidarity solidarity compensations compensations are are paid paid to clubs and that the latter are aware of their rights in this respect; 3. Establish a limit limit on

• n the

the number number of

• f players

players per club; 4. 4. Regulate Regulate the the loan loan transfer mechanism; 5. Address the third third-

• party

party ownership

• wnership issue

6. Support the implementation of Financial Financial Fair Fair Play Play (FFP) rules; 7. Address teams’instability in basketball.

Improve governance – 5 proposals

1. Extend the mission and impact of the TMS TMS on three elements: monitoring, transparency and domestic transfers; g, p y ; 2. Make compulsory the publication online for each national federation of a standardised annual annual report report on

• n transfers

transfers with minimum information including name of parties and agents; 3. Make compulsory the publication publication online

• nline of
• f top

top European European clubs’ clubs’ dealings dealings on

• n transfers

transfers; 4. Improve dispute settlements by developing national national dispute dispute resolution resolution mechanisms mechanisms; 5. For basketball, improve the means of the dispute dispute commission commission of

• f

FIBA FIBA as it is under resourced.

f Youth development and protection of minors 4 proposals

1. Strong sanctions to ensure more effective effective compliance compliance with with solidarity solidarity payments payments; y p y p y ; 2. 2. Increase Increase the the solidarity solidarity mechanism mechanism percentage from 5 to 8% of every transfer fee; 3. 3. Harmonise Harmonise conditions conditions of

• f entry

entry of

• f young

young players players from third countries into the EU; 4. 4. Improve Improve rules rules on

• n minors

minors in the context of the European social dialogue

Cooperation with public authorities 3 proposals

1. Use the existing EU EU sectorial sectorial Social Social Dialogue Dialogue Committee Committee in the Professional Football sector to consider rules on the following issues: protection of minors; excessive transfer fees; solidarity; fair and balanced competition; rules on non-EU players; 2. Improve and extend law/rules law/rules enforcement enforcement; 3. Establish within FIFA a Clearing Clearing House House and and Transfer Transfer Compliance Compliance Unit Unit working with public authorities on law enforcement

CONCLUSION CONCLUSION

Conclusion

• Th

f i l f b i b i l

• The transfer system is only
• nly a

a part part of

• f business

business rules rules

• To solve the questions regarding transfers in Europe, only a global

global h f l ti b ff ti approach approach of regulation can be effective

• Three dimensions:

 Sport  Sport  Finance  Labour market

• Any regulation should be discussed

discussed by international federations with with all all stakeholders stakeholders

Thank you for your attention

Consultthe full report on: http://ec.europa.eu/sport/news/20130207-study-on-transfers_en.htm p p p y