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Competitive Balance and Equality between Clubs

The Court in Bosman, examining the transfer system then in force, stated that ‘the same aims can be achieved at least as efficiently by other means which do not impede freedom of movement of workers’.W8 In making that point, it expressly cited its Advocate General, Mr Lenz. He accepted that a system stopping rich clubs becoming ever richer and poor ever poorer could be justified. This is a reason in the general interest which may justify the imposition of restrictions on free

  • 105 Bosman (n 1) paras 105—14. Ш6 Bernard (n 1) paras 38—50.
  • 107 Bosman (n 1) ‘It has also been argued that the transfer rules are necessary to safeguard the worldwide organization of football’, para 111.
  • 108 ibid para 110.

competition. Mr Lenz mentioned two particular alternative methods for preserving financial and sporting balance between clubs. First, a collective wage agreement which specified limits on salaries to be paid to players—commonly known as a salary cap; second, a system of distribution of income from the sale of tickets and broadcasting rights among all the clubs. Mr Lenz seemed little interested in the salary cap—with good reason, for there are several variants of this device in several sports around the world[1] [2] [3] [4] and all are hard to police as well as being of questionable validity at law, given their restrictive effect on competition and, in particular, their emphasis on players as the focus of cost-cutting.n0 Given the much greater attention he paid to it, it is the second approach, income distribution, which was plainly Mr Lenz’s preference. This, he noted, would reflect the interdependence of clubs in a sports league.

One can draw from this a claim that the transfer system cannot be justified on the basis that it is required to promote financial and competitive balance between clubs. Instead that stated aim should be achieved, if at all, through arrangements between clubs organized through the governing associations of the sport, and not by a system that involves employers imposing restrictions on employees, the players.m

In 2013 the Commission published a study entitled ‘The Economic and Legal Aspects of Transfers of Players’.n2 The study, the body of which covers more than 250 pages, aims to document the different layers of rules applicable to transfers and to consider their interactions.

It explains that transfer rules in sport are a derogation from normal employment practices in the following ways:

i) They limit the freedom of players to move from one employer to another and set restrictive conditions for such moves. Contracts may be terminated by either party without consequences (such as sporting sanctions) only if justified by ‘just cause’;

ii) They establish a system of transfer fees between clubs in order to prevent a total ban on players’ mobility.

The study explains that free movement of players is restricted under transfer rules with a view to maintaining fair and balanced competition. The question is whether this remains justified. It correctly identifies the transfer system as atypical and therefore, if it is justified, it represents a special concession to the autonomy of sports institutions. The study relies on Meca-Medina as its legal platform.113 The rules must pursue a legitimate aim compatible with the Treaty; they must be applied in a non-discriminatory manner; they must be justified by overriding reasons in the public interest; they must be suitable for securing the attainment of the objective they pursue; and they must not go beyond what is necessary for that purpose.

The study finds that the transfer rules make no effective contribution to a fight against competitive imbalance. There is a demonstrated strong link between transfer expenditure and sporting results, in particular since 2001. The identity of the clubs that dominate the later stages of the annual Champions League competition changes little; supremacy is consolidated. Payments directly linked to transfers made for training compensation and as part of the solidarity mechanism only account for 1.84 per cent of the total agreed transfer fees within Europe. This cannot have a sufficient impact to affect competitive balance in a positive way and it seems implausible that it serves as a well-targeted inducement to invest in training either. The study argues that solidarity mechanisms and youth development programmes should play a more important role. The study explicitly does ‘not argue for the end of transfer rules as implemented by sports governing bodies’.n4 But it suggests firmer commitment to improving fair and balanced competition through better and increased redistribution between clubs. It proposes, inter alia, a ‘fair play levy’ on transfer fees beyond a certain amount in order to fund a redistribution mechanism from rich to less wealthy clubs. It also suggests a limit on transfer fees, involving particular attention to contract extension and to potentially abusive ‘buyout’ clauses. The strengthening of solidarity payments is also suggested.

The Commission has not initiated any concrete follow-up to this mildly sceptical report, though it is still freely available on its website.n5

This criticism seems convincing. It follows the route mapped out in the previous chapter in discussion of the compatibility of the home-grown rules with EU law, and would insist that a choice between addressing sporting concerns by measures affecting clubs or measures affecting players should be resolved in favour of the former unless compelling reasons justify the need to prefer the latter. As with the home-grown rules, so with the transfer system: the sceptical view taken of their compatibility with EU law reflects a broader scepticism that it is justified to treat footballers in a way that differs from the treatment of ordinary employees. One might in this vein supplement the argument by reliance to Article 15 of the Charter of Fundamental Rights of the European Union, which declares that everyone, including footballers, has the right to engage in work and to pursue a freely chosen or accepted occupation, although so far the Court has treated economic

из Case C-519/04 P Meca-Medina andMajcen v Commission [2006] ECR I-6991.

  • 114 ‘The Economic and Legal Aspects of Transfers of Players’ (n 112) 8, 252.
  • 115 accessed 29 November 2016.

rights recognized by the Charter as running in parallel to the free movement rights contained in the TFEU, so the Charter probably adds only presentational force to the case.116

So in Eastham v Newcastle United in 1964 Wilberforce J, in the English High Court, took the view that the transfer system ‘provides a means by which the poorer clubs can on occasions, obtain money, enabling them to stay in existence and improve their facilities’.n7 Bosmans famous paragraph 106, delivered in 1995 in Luxembourg, is carried by a similar sense. But there are other ways to achieve this which do not impinge on the position of the player as employee. So, in short, labour market restrictions have not been but should always be regarded as the last resort available in defence of the lex sportival8

  • [1] See eg S Kesenne, The Economic Theory of Professional Team Sports: An Analytical Treatment (2ndedn, Edward Elgar 2014) ch 7; N St Cyr Clarke, ‘The Beauty and the Beast: Taming the Ugly Sideof the People’s Game’ (2010—11) 17 Col J Eur L 601; McArdle (n 72) especially 120—23; C Davies,‘The Financial Crisis in the English Premier League: Is a Salary Cap the Answer?’ [2010] ECLR 442;G Basnier, ‘Sports and Competition Law: The Case of the Salary Cap in New Zealand Rugby Union’(2014) 14 Intl Sports LJ 155; R Parrish and S Miettinen, The Sporting Exception in European Law(TMC Asset 2007) 219-22.
  • [2] However, for an argument based on Case C-309/99 Wouters (Ch 5) in favour of the lawfulness of a cap, see S Hornsby, ‘The Harder the Cap, the Softer the Law?’ (2002) 10 Sport and the LawJournal 142.
  • [3] See also S Kesenne (n 109) chs 2 and 5. One may be sceptical whether, if the load could not beplaced on players, the clubs would share revenue (much). On the pursuit of competitive balance in theorganization of team sports, which varies between Europe and North America, see S Szymanski, ‘TheEconomic Design of Sporting Contests’ (2003) 41 Journal of Economic Literature 1137.
  • [4] ‘The Economic and Legal Aspects of Transfers of Players’, January 2013 accessed 29 November 2016.
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