European Union: Does The FIFA Ban On TPO Infringe EU Law?

Last Updated: 16 April 2015
Article by Chris Smith and Stephen Hornsby

Whether it be huge transfer fees, large broadcasting deals or the financial fair play rules, football and finance is rarely out of the news. The latest issue to rear its head is third party ownership of football players. Whilst the issue in the UK dates back to the well known Tevez-Mascherano saga in 2007, FIFA's ruling in November 2014 has brought this issue to life.

Stephen Hornsby and Chris Smith of Goodman Derrick explain further.

What is Third Party Ownership?

Third Party Ownership (TPO) refers to the partial or total ownership of the `economic rights' of a football player by a third party, a non-footballing entity. Investment funds or individual investors buy a proportion of the economic rights of a player, the player's economic rights are then jointly owned by the club and the investor. Upon the sale of the economic rights of that player to another club, the third party is then entitled to receive a percentage of the transfer fee which often results in them making a large profit. A classic example of this can be seen from the transfer of Neymar from FC Santos to FC Barcelona. Neymar was initially declared to have cost FC Barcelona £47.3m, but this was later reported to be nearer £71.5m. In the end it was reported that just €17.1m was sent to FC Santos and €40m went to a third party investor, a company owned by Neymar's parents.

Reaction to TPO

In the UK, the Football Association (FA) introduced regulations, in 2009, prohibiting TPO of any player registered to any clubs within the FA. However, elsewhere in the world TPO is common. It is popular in the Spanish and Portuguese leagues and is a particularly entrenched practice in clubs in South America.

In September 2014 the FIFA executive committee discussed TPO with three potential approaches to resolving this contentious issue: (1) full transparency involving uploading all documents through FIFA's Transfer Matching System, (2) full transparency, but involving restrictive regulations, or (3) an outright ban. FIFA's president Sepp Blatter then later announced that the FIFA executive committee had voted to ban third party ownership of players outright, albeit with some transitional provisions for those TPO arrangements already in place, on the premise that the concept of TPO threatens the integrity of football. FIFA has introduced Article 18ter which prohibits TPO. The provision is to come into force on 1 May 2015. Existing TPO agreements are allowed to continue until expiration but without the possibility of extension.

Keep TPO in play?

Unsurprisingly criticism of FIFA's decision to ban TPO has been forthcoming. Liga de Fútbol Profesional (LFP) and Liga Portuguesa de Futebol Profissional (LPFP), the Spanish and Portuguese football leagues, filed a complaint with the European Commission in February 2015 over FIFA's decision to ban TPO stating that it infringes EU law. Following the ruling in Bosman, EU law applies to both national and international sporting associations. The European Commission cases of Meca Medina and Piau further established that EU competition provisions are applicable to sporting rules and, more importantly, to FIFA in particular, who as an association of football clubs that carries out economic activities, falls within the scope of EU competition law. Consequently, FIFA must abide by EU Competition law.

The basis of LFP and LPFP's legal challenge falls within EU competition law, specifically Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). LFP and LPFP are therefore trying to establish that the ban on TPO is capable of affecting trade in or between Member States, ie, between the football clubs in those Member States.

Article 101 of TFEU concerns anti competitive agreements. The Article prohibits: "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". Therefore, does the ban by FIFA on agreements between football clubs and third party investor/owners intentionally effect the prevention or restriction of competition between football clubs in the Member States?

Article 101(1)(d) states that there will be a competitive disadvantage where an agreement applies "dissimilar conditions for some undertakings to equivalent transactions with other trading parties". LFP and LPFP are challenging FIFA, (which is deemed as an association of undertakings) on the premise that the ban will have a particularly detrimental impact on clubs with lower incomes / spending power and who have become increasingly reliant on sharing players' economic rights with third parties. TPO provides these clubs with the opportunity to acquire players at an affordable price as they can share the cost with an investor. Once the ban is in force it is argued that these clubs will be unable to compete with the wealthier clubs in the transfer market.

Therefore the argument is that this ban will harm the clubs who have become reliant on TPO and distort competition between clubs therefore infringing Article 101. Notably, and clearly a point of contention for the smaller clubs, this ban is likely to have little effect on clubs like Manchester United, Real Madrid, FC Barcelona and Bayern Munich, as they have spending power which removes the necessity to rely on TPO. The likes of FC Porto however (who are through to the knock out stages of the Champions League yet again) are dependent on TPO. So without TPO will clubs from small broadcasting markets ever win the Champions League again?

There is also an argument that the ban infringes Article 102, which is intended to prevent a dominant position in the market being abused. The ruling in Piau determined that FIFA holds a collective dominant position in the market. The European Commission (EC) will have to determine whether the ban amounts to an abuse of this position. The ban has the potential to put smaller clubs at a competitive disadvantage to those larger clubs, which it could be argued, amounts to such an abuse.

LFP and LPFP have said they believe the ban also violates further fundamental EU liberties and they have reserved the right to bring further legal action against FIFA. In their joint statement the LFP and the LPFP said they "have faith that the European Commission will act swiftly, initiating the relevant disciplinary sanctions against FIFA and revoking the TPO ban". If the challenge is successful FIFA will face both sanctions from the EC and claims for damages from those affected by the ban, which will include not just the clubs and their players, but also the third party investors.

Time to send off TPO for good?

There are, however, those who share the views of FIFA on this topic and would argue that a ban is justified in order to protect the integrity and reputation of the sport. There has been widespread criticism of TPO, with Michel Platini the UEFA President voicing his concerns over the practice. Platini and others believe that TPO degrades the players' human dignity and inhibits their freedom to control their careers. TPO arrangements are often kept secret and therefore there is very little transparency and concerns have been raised about the potential conflicts of interest where the information concerning TPOs is not public.

Aside from any moral arguments as to whether third parties should be making such sums of money on the back of football transfers, from a legal perspective, an infringement of Article 101 is permissible if it is in pursuit of a legitimate objective and it is proportionate. Those against TPO will argue that the banning of TPO has been put into place in order to protect the players' interests and the integrity of the sport, which ultimately is in pursuit of a legitimate objective.

Arguments have also been put forward that TPO contravenes the principles that have been laid down in the EU's Charter of Fundamental Rights. Footballers become investments upon which those who invest take a share in their 'economic rights' and effectively become the party that barters for the footballer's future, rather than the footballers themselves. This then becomes a restriction on their freedom to move and work for whomever they wish, a right enshrined in EU law.

However, whilst many agree that action to regulate TPO was needed, there has been criticism over the implementation of an outright ban and whether it was a proportionate response to the concerns relating to TPO. Other options that have been suggested include increased regulation of TPO, caps on the amount that could be invested by a third party and/or a disclosure process to encourage greater transparency of the practice. These measures would have been less drastic options in attempting to tackle the issues surrounding TPO.

Is there a breach of EU law?

The legal battle surrounding TPO will be focused on whether or not it can be proved that (1) the ban is in pursuit of a legitimate objective to protect the interests of not just the players and clubs, but also the sport in general, and (2) the ban unfairly restricts trade between football clubs (and mainly the less wealthy clubs) in the Member States, by preventing them from entering into negotiations for players they could have afforded with the assistance of TPO. The answer to these two questions are not clear and the EU will need to take a long hard look at the effects of such a ban on football in general before making a firm decision.

Other industries have not dissimilar arrangements without much concern being expressed. Music agents help to move their contracted acts from record label to record label. What is so special about sports' integrity, human dignity and rights of man, when clubs freely move their players on when it suits them? The only legal issue has been whether the agreement with the 'owner' was freely entered into.

Looked at this way, isn't the ban really about clubs seeking to keep some control – control that they are happy to trade to broadcasters and sponsors where they get to keep the whole proceed? If this is right FIFA will lose – again.

This article originally appeared in World Sports Law Report.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.