CJEU deems FIFA transfer rules anti-competitive by nature

2024-10-10

CJEU deems FIFA transfer rules anti-competitive by nature

EthiLEX Editorial Team

The Court of Justice has hammered yet another nail into the coffin of FIFA’s monopoly on association football through its ruling C-650/22 (FIFA c. BZ) which found that FIFA’s player transfer rules are anti-competitive by nature and limit the free circulation of workers (in this case professional football players) within the EU.

PRACTICAL CONSEQUENCES: Player poaching season is now open! (assuming you are willing to litigate)

TOPICS: EU competition law – sports law (football) – EU labour law

COURT: Court of Justice of the European Union

DECISION n°: C-650/22 (FIFA c. BZ)

DATE: 4 October 2024

FACTS & PROCEDURE: A Russian football club terminated its contract with a French player which lead to proceedings before FIFA’s dispute resolution board. The player negotiated a new position with a football club in Belgium but this potentially lucrative deal fell through because FIFA’s player transfer rules require that (1) any new club employing a player would be jointly responsible for the payment of outstanding fines owed to the previous club, (2) such a club is presumed to have incited the player to leave the previous club and would be punished accordingly, and (3) the transfer itself requires documentation that the relevant national football association is barred from providing in cases where the employment contract is terminated prematurely without mutual consent. The player sued FIFA and URBSFA (the Belgian national football association) before the Belgian commercial courts for damages relating to this lost opportunity. The appellate court of Mons found in favour of the player, but went one step further and submitted a request for preliminary ruling to the Court of Justice seeking to determine whether the aforementioned three rules in FIFA’s transfer system were not actually in breach of the TFEU, in particular article 45 on the freedom of movement of workers and article 101 on restrictions to competition. The Court of Justice accepted to hear the request for preliminary ruling and was thankfully not swayed by the various spurious procedural arguments that FIFA and others employed to attempt to block the case (pts. 61-73).

SUMMARY OF RULING: On the free movement of workers within the EU (TFEU, art. 45), the Court considered that even if the termination of the employment contract with a previous club would be for a legitimate cause, and even if the new club could demonstrate that it did not incite such termination, the spectre of being jointly responsible for a large fine is sufficient to dissuade any potential new club from firmly engaging a player, which is particularly problematic for players actively looking to work in a different Member State (pts. 91-92) (as these workers need to make a larger investment into their job hunting than those looking locally). The same is true for the rule barring authorization of transfers between clubs in the presence of a disputed termination of employment, which simply prevents the international movement of players in such circumstances (pt. 93).

Given how obvious this conclusion was, FIFA et al. tried clutching at straws, and claimed – as many large monopolists do – that their rigid system (besides being a multi-billion dollar source of income) is in the public interest, more specifically, it ensures job and club stability and protects professional footballers. The Court succinctly reminded them that ensuring job stability is not a mission that appears in their statutes, nor is it a responsibility conferred on them by any public authority, and their rules which block player mobility are not shown to protect players (pt. 99). Even if imposing rigid rules does, per definition, lead to a stable club and competition system, FIFA’s rules go "far beyond" what is necessary to reach that legitimate interest, and in cases such rules are "manifestly to bear no relation of proportionality" or "manifestly infringes the principle of proportionality" (pts. 104 et seq.). The strong choice of words seems to indicate that the Court has had enough of decades of FIFA legal shenanigans, and arrives at the obvious conclusion that the three elements of FIFA’s system are indeed incompatible with article 45 TFEU (pt. 114). However, as per its custom to always temper its rulings, the Court adds that there would be no violation if it can be demonstrated that they "do not go beyond what is necessary for the pursuit of the objective consisting in ensuring the regularity of interclub football competitions, while maintaining a certain degree of stability in the player rosters of the professional football clubs" (pt. 114). But given how very far the current rules are from proportional, it is safe to assume that FIFA’s transfer rules will require a major overhaul.

The CJEU’s analysis of a potential violation of article 101 TFEU is just as outspoken, going so far as to qualify FIFA’s rules as being a restriction by object. This type of particularly grave infraction requires conduct having such “a sufficient degree of harm to competition for the view to be taken that it is not necessary to assess their effects [and which] can be regarded, by their very nature, as being injurious to the proper functioning of normal competition” (C-333/21, European Superleague Company, pt. 162 and rulings cited, which also concerned FIFA’s rules). In the case at hand, the Court defines (inter alinea) the market in question (on which competition must be protected) as the international pool of professional footballers who are actively working for a club, and the operators on that market as the professional football clubs seeking to recruit players internationally (pt. 138) and unilaterally (as opposed to a negotiated transfer). This may seem, at first glance, as an artificially narrow definition of the relevant market, but it actually results from the definition itself of “professional footballer”, i.e. someone who gets paid to play football (by a club) for a living. Although at any given time there are certainly some players who are not employed by a club, the majority of professional footballers are, per definition, engaged. Similarly, although many international transfers are negotiated, on a truly free market, the clubs should be able to access their “resources” (the players) independently, in the same way that businesses seeking to hire other types of workers should be able to do so without having to negotiate with their current employers. This isn’t to say that clubs should not impose fines on players for unwarranted premature termination of their employment contract, but this fine, combined with natural market pressures between competing clubs (and competing players), would be sufficient to ensure team stability and by extension a level playing field in competitions. It is not the club / player relationship (including fines) which are problematic or at cause in the present ruling, but rather the additional layer imposed by FIFA that prevents any free and unfettered competition between clubs seeking to unilaterally recruit players from this talent pool. Although a free market would indeed lead to more poaching by larger, richer clubs, that could be prevented by larger fines imposed at a club level. Instead FIFA’s rules amount to a “general, absolute and permanent prohibition on the unilateral recruitment of engaged players… which thus freezes the allocation of ... resources between those clubs... [and thus] constitute a clear restriction on the competition that these clubs could engage in in their absence, resulting in a compartmentalization of the market to the benefit of all these same clubs” (pt. 146, our translation). The seemingly extraneous addition of “to the benefit of all these same clubs” is actually a subtle but important reminder of the European Superleague ruling (C-333/21) that other, independent clubs outside of FIFA’s system would also stand to benefit from an open recruitment market. The Court finds that, in spite of any possible ulterior motives in the public’s best interest, FIFA’s rules were purposely crafted to ensure blockage of independent unilateral transfers. These rules “present, by their very nature, a high degree of harm to the competition” between clubs on the relevant market of player recruitment, and thus must be considered an infringement “by object” under article 101 TFEU (pt. 148, our translation). The Court, for the sake of completeness or perhaps to drive home the point even further, half-heartedly goes through the motions of mentioning the narrow exception in article 101 (3) , but arrives at the inevitable conclusion that the FIFA rules do not actually meet its cumulative conditions (pt. 157, or at least until it is proven that they do, pt. 158).

ANALYSIS: In the landmark Bosman case (C-415/93), which also involved the URBSFA and FIFA, the Court had already ruled that sports associations may not make finding new employment contingent on paying large monetary settlements to a player’s previous employer (C-415/93, pt. 114). In the more recent and equally important European Superleague case, the Court also found that another set of FIFA rules (preventing participation in non-FIFA competitions) were also anti-competitive by object (C-333/21, pts. 178-179). The conclusion in the present ruling was as inevitable as it was obvious; it is also unfortunate that for various reasons (including massive lobbying efforts and interventions by interested governments) it took decades to arrive. With each successive FIFA decision, the CJEU and the national courts chip away at the rigid monopolistic structure that FIFA et al. have imposed on association football globally. FIFA’s response, posted three days after the ruling, was a shiny new transfer information section of its website, an “interactive tool to keep fans on ball over global transfer windows”. FIFA continues to proudly display the $6.45 billion dollar international transfer fees at the top of its “Mid-year 2024 International Transfer Snapshot” page. This defiant reaction is similar to those from Meta, Apple, and Google in response to their respective fines. The CJEU does its best to supply the nails, but the coffin lid on their monopolies is still held firmly open. Stacks of money are almost impossible to compress.

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