Today, the focus will be on the CJEU judgments handed down in the International Skating Union (ISU) and European Super League (ESL) cases which confirm that sports governance is susceptible to detailed competition law scrutiny. Whilst we all digest the judgments, it is worth keeping in mind the recent UK arbitration tribunal ("Tribunal") ruling (dated 30 November 2023) which found in favour of a challenge brought by a group of football agents in the UK. The Tribunal concluded that the implementation of certain parts of the FIFA Football Agents Regulations ("FFAR") (specifically those imposing limitations on the fees payable to agents) would infringe the UK competition law rules.
The FFAR decision is only the latest example of the struggle for uniform implementation of the FFAR. This article provides an overview of the ongoing twists and turns of the implementation of the FFAR across jurisdictions, which are illustrative of the uncertainty created by a lack of clear guidance on the relationship between sports governance and competition law against the background of evolving regulation and business models in the sporting arena.
BACKGROUND
The FIFA Council approved the FFAR on 16 December 2022 to increase transparency in relation to the role of agents and their fees. The FFAR in part entered into force in January 2023 and came fully into force on 1 October 2023 and deals with a range of matters focused on the activities of agents and their obligations vis-à-vis their clients. This includes, amongst other things, rules on triple representation – e.g., where agents seek to act for both buyers and sellers in a player transfer – and imposes service fee caps for agents. Article 15 of the FFAR provides a breakdown of these caps, which vary depending on who the agent acts for in the transaction and the individual's (player or coach in question) annual remuneration (if acting for an individual or the entity seeking to engage the player), or the transfer fee (if acting for the selling club). The FIFA explanatory notes on the FFAR explain the introduction of the maximum transfer fee by reason of the main objective of the FFAR being "to protect the integrity of football and the proper functioning of the transfer system".
Under the FFAR, it fell to the national member associations (generally the football governing body in that jurisdiction, such as the FA) to implement and enforce the FFAR by 30 September 2023 by way of national football agent regulations.
Although the deadline for implementation has passed, associations of agents in various jurisdictions in Europe have sought to challenge the applicability of the FFAR (and the corresponding national implementing regulations), in most cases on competition law grounds. These challenges generally argue (amongst other things) that the FFAR (in particular those rules within the FFAR which set limits on agent fees) are in breach of the European (and national) competition law prohibitions on anti-competitive agreements and/or that FIFA is abusing its dominance in imposing these rules, all with the effect of restricting competition on the market for football agents' services. To date, these challenges have had varying levels of success, and, at the European level, there is a preliminary reference pending before the European Court of Justice ("CJEU"), as national courts struggle with how to interpret competition law in the sports context.
The extent to which the rules and actions of sporting bodies should be subject to the rules of competition law, or whether sporting bodies should instead be afforded more leeway (in the interests of recognising the specificity of sport) than other economic entities, has long been an issue courts have struggled with and has been pending clarification for the last couple of years before the CJEU. The wait is now over and hopefully some of the confusion arising in the six years since the underlying Commission decision in the ISU case in 2017 can now be resolved.
However, the fact specific questions relating to the FFAR's compatibility with EU and national competition rules are unlikely to be resolved until the outcome of the preliminary reference before the CJEU and any subsequent response from FIFA. This means that agents, players and clubs across Europe will for now continue to operate in a divided system with some jurisdictions having implemented the FFAR and some which have not. Moreover, in the UK post-Brexit, will not be binding although it is likely to refer to EU precedent (as the Tribunal did in its 30 November decision).
DEAR CJEU: HOW (F)FAR IS TOO (F)FAR?
Further to a preliminary reference by the Regional Court of Mainz in Germany in March 2023, the CJEU is at present considering whether the competition law prohibitions under Articles 101 and 102 TFEU (amongst other EU rules) ought to be interpreted as precluding the FFAR. The preliminary reference is based on the preliminary findings of the Regional Court of Mainz that the FFAR fall within the scope of Articles 101 and 102 TFEU, noting in particular that it considers (in line with the CJEU's decision in Piau) the activities of football agents to be economic activities involving the provision of services, as opposed to being activities within the specific nature of sport. The Mainz court however felt that the CJEU in its previous case law had not clarified the following points:
- the extent to which the leeway afforded to sporting bodies by the test established in the Meca-Medina and Majcen decision only applies to rules of a purely sporting nature that directly affect sporting competition itself (e.g. doping rules), or whether the test also applies to rules adopted by a sporting association;
- whether the Meca-Medina test should also be applied beyond the scope of Article 101 TFEU, so as to also apply to Article 102 TFEU;
- the extent to which objectives pursued by a rule/action of a sporting body, which do not directly concern the functioning of sporting competition can be considered as legitimate objectives to carry out a Meca-Medina assessment; and
- what margin of discretion sporting bodies have in deciding whether the rules/actions in question are necessary to achieve the objective they say the rule in question is seeking to achieve.
No date has been set for the hearing, but we can expect close alignment with the ISU/ESL judgments, i.e. that these sorts of activities are economic in nature and subject to the competition rules.
The European Commission is reported to have provided observations on the matter to the CJEU, to the effect that in its view, the restrictions imposed by the FFAR can be justified by the legitimate objectives pursued by FIFA, such as the goal of protecting contractual stability; notably the Commission appears to go further and consider that the FFAR may not sufficiently prevent conflicts of interest where agents represent both players and the club seeking to engage the player (which is not prohibited under the FFAR).
Interestingly, it appears that in parallel the European Commission may itself also be considering whether to investigate the matter. Reportedly, in October 2022, The Football Forum ("TFF"), an association representing football agents and players, submitted a complaint to the Commission, alleging that the FFAR breached EU competition law.
A STEP TOO (F)FAR?
There have been a number of successful challenges to the FFAR across what might be considered some of the most important jurisdictions for the European transfer market, which have put a halt on the implementation of the FFAR, at least temporarily. For instance, the FFAR have to date not been implemented in the UK, Germany or Spain, despite the deadline imposed by FIFA of 1 October 2023 having passed. It will be interesting to see whether more countries in Europe follow suit.
England
As mentioned above, the Tribunal found in favour of a claim by four agencies, CAA Base, Wasserman, Stellar and ARETÉ, which challenged the implementation of the National Football Agent Regulations ("NFAR") (the national implementing regulation of the FFAR in England) in relation to English domestic transfers. The Tribunal found that if the FA were to implement the provisions of the FFAR which would impose a fee cap and pro rata payment restrictions on agents' fees in the NFAR, it would infringe the UK Competition Act 1998.
In its detailed and extensive partial final award, the Tribunal found that the relevant provisions of the NFAR fell outside the scope of Meca-Medina on the basis that they did not relate to the regulation of sporting activities but to pricing in what the Tribunal held to be a purely economic context. The Tribunal held that the extensive evidence of the genesis of the FFAR (which the Court of Arbitration for Sport ("CAS") did not have the benefit of receiving before coming to its decision – see below) suggests that the rule changes were not intended to pursue the claimed legitimate object of remedying market failures and preventing abusive conduct by agents (of which the Tribunal believed there was limited evidence) but instead was driven by concerns about the increased size of agents' fees. However, what was determinative for the Tribunal from a Meca-Medina standpoint, was the lack of any discernible connection between the fee cap and the alleged abuses and market failures and the apparent disproportionality of the pro rata payment rules to these concerns.
In addition, the Tribunal expressly stated that the evidence of the genesis of the FFAR was the reason that, unlike the CAS, it concluded the fee cap was, as a form of buyer's cartel, a by object infringement. The evidence also drove the Tribunal's conclusion that the pro rata rule was likely a by object infringement. In any event, it found that, based on the significant loss of revenues that agents would likely experience, both rules were by effect infringements of Chapter I of the UK Competition Act 1998. For the fee cap or pro rata rules to benefit from exemption under section 9 of the Competition Act 1998, it needed to be shown that players would benefit from the rule changes; the Tribunal concluded that the FA had failed to do so and thus did not clear the first hurdle.
Finally, the Tribunal concluded that the FA has a dominant position in the market for agents' services in England and that the introduction of the fee cap and pro rata rules would be an abuse of that dominant position.
Pending the decision of the Tribunal, the FA had delayed the implementation of parts of the domestic FFAR implementing rules, the NFAR. In the interim, the FFAR started governing the rules of football agents in relation to representation agreements with an "international dimension", as set out in Article 2 FFAR. While the Tribunal's partial award makes clear that if the fee cap and pro rata rules are introduced, the FA will be in breach of the UK Competition Act 1998, it has reserved any remedy for its Final Award. The FA has also not yet announced how it proposes to proceed and it will be interesting to see how, in a post-Brexit world, matters will be approached by the FA given that, despite the heavy reliance placed on EU precedent in in the Tribunal's partial award, neither the Tribunal nor the FA would be bound by the outcome of any preliminary reference before the CJEU.
Germany
In March 2023, the District Court of Mainz made the preliminary reference to the CJEU and suspended proceedings brought by agents challenging the FFAR implementation in Germany, pending the outcome of the preliminary reference.
While awaiting the outcome of the CJEU's decision, in May 2023, the District Court of Dortmund granted an injunction prohibiting FIFA from implementing the FFAR. Based on its preliminary assessment, the District Court of Dortmund found that the FFAR was incompatible with EU competition law. The Court acknowledged the need to protect agents while waiting for the CJEU's decision, as it considered that the possible restrictions arising from the FFAR could jeopardise the agencies' existence. Weighing up the potential harm on both sides (i.e., FIFA and agents), the District Court of Dortmund found that the risk of harm was greater to the agents. At the same time, FIFA and the German Football Association ("DFB") were not prepared to refrain from implementing the FFAR pending the outcome of the preliminary reference. The FFAR was therefore suspended in its entirety for all parties to transactions with a link to the German market. Transactions will be deemed to have a "link" to the German market if any party to the transfer (i.e., the agent, club, player or coach) has a link to Germany. In August, the District Court of Dortmund fined the DFB €150,000 for incorrectly implementing the ban (as the DFB communicated that the ban only applies to contracts under German law or ones concluded with players, coaches and clubs based in Germany). FIFA has appealed the fining decision which is pending before the Higher Regional Court in Düsseldorf.
Spain
In line with the approach in Germany, the Commercial Court of Madrid announced in November that the section of the FFAR that restricts agent fees breaches Article 101 TFEU and provisions of Spain's competition law. In granting an interim suspension as requested by the Spanish Association of Football Agents, the Court held that the Royal Spanish Football Federation ("RFEF") must refrain from transposing the FFAR into its internal regulations and imposed provisional measures to this effect. Where provisions have been incorporated, the RFEF cannot apply them. Consequently, the RFEF will not be able to cap any agents' fees where there is a link to the Spanish market.
The Spanish Association of Football Agents is now seeking the permanent annulment of the FFAR, the hearing for which is expected next year.
SO CLOSE BUT (F)FAR FROM OVER
Despite some successful challenges, the debate is far from over, as signalled by the "CAS" and courts in the Netherlands and Belgium, all of which considered that the FFAR was not incompatible with EU competition law.
CAS Ruling
The CAS in July 2023 ruled the FFAR to be compatible with EU, Swiss, French and Italian law. The Professional Football Agents Association ("PFAA") had tried to argue that the commission caps imposed by the FFAR restrict competition by object and further, that FIFA is abusing its dominant position. The CAS (which typically does not consider questions of competition law) found that the caps do not amount to price fixing and that the PFAA failed to demonstrate that the capped fees resulted in the imposition of unfair prices which amount to an abuse of FIFA's dominant position.
In a knock to the CAS, amendments were made to the FFAR prior to its implementation in France and Italy (to ensure compatibility with national rules), contrary to the CAS's findings that the FFAR are compatible with French and Italian law. Separately, the Swiss Competition Commission has been reported to be investigating the compatibility of the FFAR with Swiss competition law (although it refused to impose interim measures to prevent the FFAR's implementation), further to a complaint filed in March 2023 by the Swiss Football Agents Association.
Netherlands
In May 2023, the European Football Agents Association and Pro Agent (the representative body for Dutch football agents) were unsuccessful in seeking an injunction to prevent the FFAR (in whole or part) from being implemented in the Netherlands as the judge noted that, in the interests of ensuring a coherent application of the FFAR, it was best to wait for the outcome of the preliminary reference to the CJEU brought by the Regional Court Mainz. Despite this initial success, it is to be expected that the court will follow the judgment of the CJEU on the preliminary reference and the final whistle is therefore yet to be blown.
Belgium
The Belgian court has been one of the most unequivocal: In September 2023, the Brussels Commercial Court dismissed an application brought by agents against FIFA and the Royal Belgian Football Association to suspend the FFAR. The Belgian court found that there was no clear breach of competition law and noted that the agents did not prove that FIFA was pursuing an illegitimate aim.
CONCLUSION
While jurisdictions such as the Netherlands were alive to the implications of varying approaches across Europe, it has not stopped the courts elsewhere from suspending the FFAR, leading to a fragmented market for agency services across Europe.
The divergence in approaches by courts across Europe demonstrates not only the uncertainty looming over the FFAR and its application, but also the wider lack of clarity as to the extent to which the acts of sporting organisations ought to be constrained by the principles of competition law.
The ISU and ESL judgments have given some clear direction that sporting bodies will need to be mindful of the competition rules and of the need for good governance rules. We will need to wait to see whether the CJEU chooses to give further guidance around the vexed question of how far the margin of appreciation afforded to sporting regulators under Meca-Medina extends. In practice the question remains: how far will sporting bodies be able to go without finding themselves off-sided by competition challenges?
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