Commission blows the whistle over inflated football transfer fees and lack of level playing field
07.02.2013 Football clubs spend around €3 billion a year on player transfers, but very little of this money trickles down to smaller clubs or the amateur game, according to a European Commission study published today. The number of transfers in European football more than tripled in the period 1995-2011, while the amounts spent by clubs on transfer fees increased seven-fold.
But most of the big spending is concentrated on a small number of clubs which have the largest revenues or are backed by very wealthy investors. The situation is only increasing the imbalances that exist between the haves and have-nots, as less than 2% of transfer fees filter down to smaller clubs and amateur sport which are essential for developing new talent. The level of redistribution of money in the game, which should compensate for the costs of training and educating young players, is insufficient to allow smaller clubs to develop and to break the strangle-hold that the biggest clubs continue to have on the sport's competitions.
"The European Commission fully recognises the right of sports authorities to set rules for transfers, but our study shows that the rules as they are do not ensure a fair balance in football or anything approaching a level playing field in League or Cup competitions. We need a transfer system which contributes to the development of all clubs and young players," said Androulla Vassiliou, European Commissioner responsible for sport.
Transfer rules are set by the sport governing bodies - for example, FIFA for football and FIBA for basketball. FIFA's online Transfer Matching System (TMS), which is used by 4 600 clubs worldwide, has increased transparency in international transfer operations but more needs to be done at national level. The report finds that the current system continues to mostly benefit the wealthiest clubs, superstar players and their agents.
It recommends that FIFA and national football associations’ rules should ensure stronger controls over financial transactions and for the introduction of a 'fair-play levy' on transfer fees, beyond an amount to be agreed by the sport's governing bodies and clubs, to encourage a better redistribution of funds from rich to less wealthy clubs.
The study also suggests a limit on the number of players per club, a review of the issue of 'third-party ownership', where a player is effectively leased to a club by an agent, and an end to contractual practices which inflate transfer fees, such as where a club extends the protected period during which players cannot be transferred without its consent. The report also calls for full implementation of UEFA's Financial Fair Play rule and stronger 'solidarity mechanisms' to enhance youth development and the protection of minors. The authors of the study urge sports bodies to improve their cooperation with law enforcement authorities to combat money laundering and corruption.
The results of the study will be analysed by the EU Expert Group on 'Good Governance in Sport' at its next meeting in April. The group, which is also discussing measures to address match-fixing, is composed of national experts and observers from FIFA, UEFA, the European Professional Football Leagues, European Club Association and the International Federation of Professional Football Players. The group is expected to deliver a report to EU Sport Ministers before the end of the year.
The labour market in football is extremely segmented, with a 'primary market' consisting of a small number of superstar players and a secondary market made up of professional or semi-pro players who do not earn big money and often face difficulties in developing their careers, especially after their playing days come to an end.
In order to improve fair and balanced competition through better and increased redistribution between clubs, the study proposes to:
i) establish a 'fair play levy' on transfer fees beyond a certain amount in order to encourage better redistribution of funds from rich to less wealthy clubs. The aim of the levy would be to restore some competitive balance. The threshold, the rate of the levy and its scope should be determined by international football governing bodies in consultation with clubs;
ii) better publicise the movement of players to ensure that the relevant solidarity compensation is paid to clubs and that the latter are aware of their rights;
iii) establish a limit on the number of players per club;
iv) regulate the loan transfer mechanism;
v) address the issue of 'third-party ownership' of players' rights by adopting rules which protect the integrity and freedom of players as well as fairness of sport competition. The rules should not disproportionally hinder financial investment in sport and should be compatible with EU rules on free movement of capital;
vi) support the implementation of Financial Fair Play rules to encourage clubs not to spend more than their revenues;
vii) address teams’ instability in basketball.
To limit inflated fees, the study recommends that:
i) clubs are prevented from extending the 'protected period' during which a player needs consent to be transferred because this effectively forces up transfer fees (contracts are normally protected for three years up to the age of 28 and two years thereafter);
ii) 'buy-out' clauses in players' contracts should be proportionate.
In its 2011 Communication 'Developing the European dimension in Sport', the Commission stated that transfers regularly came to public attention because of concerns over their legality and a lack of transparency about the financial flows involved. In January 2012 the Commission launched a study on player transfers with the objective of providing a detailed overview of the economic and legal aspects of transfer systems in team sport in Europe, focusing on football and basketball in particular. The study was carried out by a consortium composed of KEA European Affairs (Belgium) and the Centre for the Law and Economics of Sport at the University of Limoges (France).
The study's publication comes 17 years after the European Court of Justice's Bosman ruling, which led to profound changes in the way professional football is organised in Europe and throughout the world by eliminating obstacles to the free movement of players, and 12 years after an informal agreement between the Commission, FIFA and UEFA which led to revamped transfer rules for professional football.
The European Commission has proposed a sport chapter as part of Erasmus for All, the new EU programme for education, training, youth and sport. The proposed budget for sport is €34 million a year on average between 2014 and 2020. Support will be given to transnational projects aimed at boosting the exchange of know-how and good practices, non-commercial European sport events of major importance and studies and statistical work to strengthen the evidence base for policy-making in sport. The main beneficiaries will be public bodies and civil society organisations active in grass-roots sport. The Commission currently supports a number of preparatory initiatives in the area of sport. These include five pan-European projects aimed increasing cooperation to address match-fixing.
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