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EC demands reform of the transfer system. The pressure is mounting.

By Tony Attwood

The European Commission has recommended reform of the football transfer system.  And what the EC wants the EC usually gets (as with for example the Bosman ruling).

The new plan involves limiting what the EC sees as “inflated” transfer fees and a levy (interestingly being call a “fair play” levy) on fees rising above a set level.

The argument is that the EC has allowed football to be an exception from various standard EU regulations on competition so long as it is possible for clubs to move up and down the leagues through promotion and relegation.

Naturally anything that affects income and expenditure could also have an impact on ticket prices.  We all know that Arsenal tickets are hard to come by and have been said (wrongly) by some to be the most expensive in the Premier League.  This could affect us all.

The EC now suggests that the cost of salaries and transfers of top players players means that in effect there is a closed league at the top level with the same clubs always occupying the top slots.  Only 2% of transfer fees actually reaches the smaller clubs, according the to EC review.

And – and this is the bit that is of particular interest – there is a concern about criminal activity.  If you have seen the occasional forays into corruption in football written by myself and colleagues on Untold you will know that we see match fixing by gamblers as only one part of the corruption problem.  One of the other major areas is the way football clubs and transfers can be used as a front for money laundering.  And what do you know…  The EC is getting rather exercised about “criminality in the transfer market”.

As a result the EC is now putting forward a series of proposed changes for the transfer market including…

1:  Transfer fees on players who extend their contract limited to “70% of the gross salary owed to the player for the entire period of his contract”

2: The regulation of buy-out clauses “to prevent abusive practices”.

3: A “fair play levy” on transfer fees over a fixed minimum, with this money being given to the poorer clubs.

4: An official channel which records the movement of players so that everyone can see exactly where the money is going, and ensure that everything happens according to the rule book.

5: A campaign to ensure that players and clubs are aware of their rights and duties.

6: A EU wide limit on the maximum number of players per club.

7:  Regulation of the loan transfer system across the EU (it is virtually unregulated at the moment)

8:  Officially ending third-party ownership in all EU countries.

9:  Financial Fair Play to be introduced and supported.

The report says that since 1995 (when Bosman came in) the annual transfer spend by clubs has increased from €403m to €3bn in 2010-11 with the number of transfers going up 300%.  The vast majority of this spending comes from a very tiny number of clubs.

In drawing up its proposals the EC has consulted with Fifa, Uefa and the European Club Association.

This does not mean the EC will radically change the system of transfers.  Instead Androulla Vassiliou the Commissioner responsible said, “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.”

Kea, the Brussels-based consultancy involved in the study said, “Seventeen years after the Bosman ruling and 11 years after the informal agreement between Fifa, Uefa and the European Commission on the transfers of players, the document reveals that sporting regulation in relation to transfers has contributed to the increase of free movement of professional players without, however, managing to curb the amount of certain transfer fees.

“The study proposes measures to encourage transfer rules that contribute to more balanced and fair competition. While redistribution of transfer expenditures to clubs training players constitutes one of the justifications for the transfer rules, redistributive impacts linked to the transfer market remain limited. Indeed training compensation and solidarity mechanisms only account for 1.84% of the total agreed transfer fees within Europe.”

The Kea report highlighted key issues that the study showed were major problems.

1:  Huge debts that threatens the financial stability of numerous clubs.

2:  The criminality which Untold has been publicising.  It added to our list of corruption, money laundering and illegal activities relating to gambling, also introducing the trafficking of players and abusive terms of employment.

3:  Forms of investment in players, including third party ownership, which take power away from clubs and the regulatory authorities.

4: The inability of organisations like the FA to organise and regulate football in the face of the larger clubs, which are run like businesses and have an obligation to deliver financial results to their shareholders.

The cases of Leeds United’s and Portsmouth’s collapse, the money laundering problems that are still surrounding Birmingham, and the huge amounts of money pouring into Chelsea, Manchester City, and PSG, are all cause for concern.

The report also says that, “The turnover of the first division championships of the 53 Uefa member countries increased from €9bn in 2006 to €12.7bn in 2010. But overall net losses increased steadily over the period 2006-2010 to reach €1.64bn in 2010. 56% of the clubs concerned are reporting net losses for the year 2010….

“In general the transfer market suffers from a lack of transparency in transactions [which] is encouraging a competitive imbalance. Therefore, the transfer matching system from Fifa and financial fair play from Uefa constitute very key developments whose implementation should be encouraged. They show the willingness of sporting bodies to tackle in a serious manner abuses related to some extent to the transfer market.”

The EU Expert Group on “Good Governance in Sport” will take up the issue in April.  This is the same group that is already discussing match-fixing.  The report is expected to go to EU sport ministers before the end of the year, and changes should be announced in 2014, for implementation thereafter.

So what will all this mean for football fans? Greater competition yes, and quite possibly a decline or at least stabilisation of ticket prices once the EC gets its hands on the issue of competition.

Recent posts…

Gambling, ref fixing, money laundering… all part of English football’s rich pagent

The politics of refereeing; it is not just what you know, it is who you know

A fair and balanced competition. The EU is about to act.

——————————–

The books…

The sites…

18 comments to EC demands reform of the transfer system. The pressure is mounting.

  • avatar Fishpie

    Tony
    Thank you ever so much for reporting this stuff.
    What is your opinion on how Arsenal might feel about these potential changes?

  • avatar Shard

    These are encouraging initiatives, but I’ve returned to being a cynic these days. I’m not sure any organisation will curb the corrupt practices in football in any real way. They might pay lip service or selectively apply the law to smaller clubs, or clubs that don’t fit into the corrupt profile. But I’m not hopeful they’ll actually take the corruption head on. I’m still generally a happy person and an optimist in most things, but I don’t have faith in the system anymore, when it comes to football. And it being a private concern, there is less opportunity to bring about real change in the system. All you can do is add interest groups and let them share a piece of the ever growing pie. Still. I hope I’m wrong.

  • avatar nicky

    As a longterm cynic of anything emanating from Brussels (except sprouts, chocolates, cheese and Walter B.),I look with suspicion at yet another EC levy (“fair play” or not).
    I bet “the poorer clubs” will wait long and hard for any money from this source.
    There must be a secret conclave in the Brussels city devoted to the creation of taxes and levies so as to perpetuate the lifestyle of the EU and MEP lovies.
    The sooner the UL secedes from the Union the better.
    Walter can come and live here.

  • avatar nicky

    Sorry! For “UL” please read “UK”.

  • An exceptionally good Post picking up on issues that really need to be widely read, and understood by fans, who as usual are NOT included in the machinations of the EC, UEFA, FIFA, the FA or the Premier League.

    Trying to remain open minded, it is fair to say that the general drift of the proposals in the report seem well intentioned.

    However there is a long way from ‘proposals’ and their agreement and implementation, so we can expect a lot of elapsed time and prodigious watering down of anything impinging on the various football associations, as and when, negotiations commence between the interested parties.

    Why did I query the lack of fan involvement?

    Taking the latest EPL-FFP regulations soon due to be formally adopted by the Premier League, the net affect that is intended to be the result of their adoption is the protection of the club owners by restricting the amount of money that can be paid to players by reference to each club’s revenue income, meaning there will be more money available to each club after the new Sky multi billion pounds sterling contract commences in 2014.

    What of the fans? Will they see a reduction in the costs of their seats or season tickets? Or will seat prices be held during the course of the new TV rights contract?

    The answer to all these questions is a firm NO!

    Let’s face it, as player salaries will be linked to revenue income (turnover) the way for the clubs to meet the increased demands of the players and their agents will be to increase the cost of seats and season tickets.
    So, — let me see — oh, yes, the fans will be screwed over, the (top) players will get their dough, and the club management and owners will do very nicely out of the new EPL-FFP rules, as the management salaries are not covered by the rules, and the increased profits will be distributed to the owners by way of dividends issued.

    Q.E.D. :-)

  • avatar jayjay

    No doubt Arsene Wenger (not Arsenal FC ) will be over the moon if this works out as he has been advocating for such for too long. BUT this does not mean Arsenal FC will start winning trophies!!!!!!. Nonetheless this will instil discipline in the way football clubs are run!!!!

  • avatar Mandy Dodd

    As you say, “what the EU wants , the EU usually gets”. Wonder if this is part of wider actions they are taking against money laundering. But for football, something clearly has to be done. Platini has suggested that the future of the game is at stake. It may take time, but I believe the tide is finally turning. Unfortunalely, for Arsenal, we are about to come up against one of the two best teams in the world , who appear to be run without a hint of any of these problems, this negates the arguments of the likes of Chelsea, PSG and Citeh who claim success must be bought. Ok, I know, BM come from a good starting point, but then, there is the likes of Dortmund….and hopefully soon, if the PGMOL allow, Arsenal. The EPL and FA are too wrapped up in a certain club or two, but ultimately, they will not be able to resist. Do wonder what the EUs motives are though, however worthy their claims?

  • avatar Adam

    You only have to look at the implementation of TMS to see evidence of past problems. Why would an industry need such a monitoring system if their were no problems.

    Anyway its all a power merry-go-round. My money’s on the EU.

    Look forward to more articles on this subject.

    For me, the outright banning on third party player ownership will have the biggest impact on European football.

  • avatar Stuart

    This is good news however, it is concerning that everything seems to be going quite socialist.

  • Not sure I follow, Stuart.

    A potentially more money grubbing example of raw capitalism would be hard to find.

  • avatar Stuart

    RA
    How everything is becoming so controlled and everyone is to have the same opportunity regardless of what they create for themselves.

  • avatar Arvind

    I’m not an authority on this stuff but I’ll take a shot.

    I like 4,5 and 8 from Tony’s list.

    4 – Because it’ll be easier to follow the money trail and potentially weed corruption at all levels out.

    5 – More education is never a bad thing.

    8 – Less third party ownership possibly equal to less corruption and less of players being used as pawns.

    I’m unclear on 1, 2 and 3.

    1 – What’s the purpose of this rule? So for example: If Theo extended his contract and will get paid 20 million over 4 years, we can sell him at a maximum of 70% of 20 million? That’s irrespective of how well or poorly he performs or what his actual “market value” is. So correct me if I’m wrong, in that case there was no way we could have got 24 million for RVP in his last year. Again..WHY is this rule there at all?

    The only purpose I can see is that the selling club not charge high amounts and everyone have a “fair” chance of buying the player. What “fair” means is immensely subjective..which brings me to 2 and 3.

    2 – Why is a buyout clause abusive? Surely it’s decided by the player, his reps and the buying club at the time of signing a contract? If someone meets it, the player goes. It’s a risk (which could work either way) for the club and the player. If the player’s confident he will do well, he signs it like Demba Ba and settles for a lower salary but moves quickly. So Newcastle do lose out..it seems…but they didn’t want to pay him a higher salary at the start, so they lose now. I do NOT get what is abusive about this.

    3 – I have a major problem with 3. A major major problem. Basically just says, since you have more money it’s your duty to prop the rest of the league up. The point is not about whether you can afford it or not. On what grounds to the poorer clubs get the benefits of the richer clubs money?

    Yes I know I’m going to get slammed for this but I’d honestly like to know. I’ve had discussions with Shard and Bob in the past where a point has been made..that the rich clubs need the poorer clubs for the league to exist. But here’s the thing, hypothetically speaking..lets say it was possible for rich clubs to not be dependent, would you guys still say it is fair? I honestly don’t like it one bit and it feels like leaching..big time.

    I’m unclear about what 6, 7 and 9 mean:

    6 – Putting a cap on this is possibly to prevent clubs from stockpiling players. What it also does is put many footballers out of a job. I can see this coming back to bite the powers that pass this. As long as things are clear between the player, reps and both clubs at the start..I’m fine with stockpiling. It’s a voluntary choice. It sucks because those with more money will always do this…but it is their money.

    Yes..if their money was earned in a corrupt way..tackle that, but if it was earned fairly like say ManU marketing stuff worldwide and earning revenue, I wouldn’t like to put a cap.

    7 – I don’t know what they mean by regulating the loan market. I’d like to learn more about this.

    9 – FFP. I like rules that say, you have to make a profit and put some of it back into developing your youth system. How much I have no clue. The reason being, putting money back into the “game” will actually develop the game. Better infrastructure, better pitches, better drainage, better self sustainance…will eventually lead to people not even needing to splash cash on big players. But again..putting a cap on earnings or salaries..I’m sorry it’s an unpopular choice but I do not like it.

    Not that I have the slightest bit of control over what happens in football or anywhere..and FFP will possibly happen…in fact the whole world is moving towards a horrendous mix of multiple forms of governance.

    There is NO capitalist country (in the true sense..and if someone is willing to discuss this in a non condsecending manner, I’m happy to), plenty of socialist countries and a large number of terribly mixed economies. Oh well… why isn’t there mid week football? So much nicer .. :)

  • avatar Brickfields Gunners

    A very good article ,Tony ,and some very intresting and thought provoking comments from the guys .Thanks .

  • avatar Nannu

    Anyone with half a brain should have worked out that Van Persie was never going to sign a new deal. The signing of Podolski and then especially Le Chapman should have rubber stamped that in everyone’s minds if it needed to be.Does anyone think that our wonderful owner (love you Stan – a true Arsenal man, unlike ‘sod off Jabba’) would have committed to spending c. €25m or so on those two players without knowing that he had at least as much coming in from the sale of Van Persie?Over the course of each year under this owner we will never, ever see a ‘net investment’ in the playing squad in combined transfer fees and wages – not if we qualify every year for the CL, not when the new commercial deals kick in, not if the money from Sky went up 50 fold. The club is run for personal wealth creation. Wenger does a fine job of carrying out Kroenke’s wishes whilst Gazidis picks up a salary that is 4x the market level for a CEO in a small to mid cap business (which is what Arsenal is).They are guilty by association and therefore I don’t believe a single word any of them utter when it comes to the ‘transfer business’ that we’re supposedly going to do, whether buying or selling

  • avatar Shard

    Oh come off it Nannu. You have no idea what Arsenal are doing so stop going on as if your opinion is fact. As for Gazidis salary, he is not the highest paid director in the premier league. The data is a little old but ManCity, ManUtd, and Tottenham pay their directors more, while Wolves were not far behind with Chelsea, Sunderland and WBA following them. Gazidis is very much paid at market rate.

  • avatar Shard

    This article is linked to by the media watch on the official site. Congratulations Tony :)

  • avatar Shard

    Arvind,

    There are many ways for the clubs to make money. Not all of them are off their own doing. ManU make their money through retail and merchandising, but do you think Sky have nothing to do with that?ManU’s popularity in Asia is the direct result of Sky promoting them,even if it was a mutual benefit. ManU’s matches are shown the most by TV in the UK too, making them more money. That decision is made by the TV bosses. There is no such thing as pure capitalism. It’s never really existed. All market forces are open to manipulation.

    Would it be unfair on ManU, or even Arsenal to impose a ‘luxury tax’ for exceeding a set spending limit? Yes. But the rationale behind it is that it’ll make for a more competitive league, thereby increasing viewership and sponsorships, thus recompensing the clubs who lose out, with increased income.

    Ultimately it depends on what you value more. True competition on the field (which has to be artificially created) or true competition in the financial world (which unfortunately doesn’t exist and would be much more complex to create)

  • avatar Arvind

    That’s very true Shard…your last paragraph I mean. And I guess that’s what all sport is..in the end. An artificially created bubble for people to enjoy. And..I’m fine with that.. except that even IN that..there are people (clubs) who through good practices and management who’ve reached a certain stage and are capable, without any malpractice to grow further. The fact that they are stopped at the cost of “inclusive growth” or “welfare state” or “fair play” deeply saddens me at times.

    You’re right that SKY and TV help..but it is a big win-win situation for both. SKY don’t get that much money without ManU playing or vice versa. It’s a business transaction..again, which is fair (I think) and exploited by both parties to the maximum. If everyone did it, then it would be meritocratic IMO.

    You’re also right, that it’s never happened…I’m just thinking..that if it did, and everyone did what they could and nothing more or less…world would be a better place.