FFAR or Foul Play? FIFA’s Competition Law Conundrum
On 30 November 2023, an English Football Association (“FA”) tribunal (“Tribunal”) ruled that the implementation of certain parts of FIFA's Football Agents Regulations (“FFAR”) in England, specifically those imposing limitations on the fees payable to agents, infringe UK competition law (“Decision”).[1] The Decision deals a fresh blow to FIFA's attempts to regulate fees charged by football agents, igniting a debate that underscores the delicate balance between regulatory oversight and market competition within the global ecosystem of football.
The FFAR
The stated aim of the FFAR is to increase transparency regarding agents and their fees. Fully enforced from 1 October 2023, the FFAR introduce a licensing system for football agents and govern their services in player and coach registrations, and the transfer of players and coaches between football clubs. However, they also impose a cap on agent fees, sparking some controversy.
The FFAR apply in relation to international transfers and all national member associations are required to adopt complementary regulations applicable to domestic transfers. To align with the FFAR, the FA was mandated to implement its own regulations, known as the National Football Agent Regulations (“NFAR”), by 30 September 2023.
Key changes introduced by the FFAR included:
- Limitation on agent fees. Agent fees would be restricted, ranging from 3 to 5% of the player's annual earnings when the agent represents either the player or the purchasing club, and 6 to 10% when representing both, or 10% of the transfer fee when acting for the selling club, depending on the nature of the client and the deal value (“Agent Fee Cap”).
- Pro-rata payment regulation. Payments would be distributed on a pro-rata basis every three months, departing from the previous practice of lump sum payments at the end of a transaction (“Pro-Rata Payments Rule”).
- Single representation mandate. Agents would be prohibited from representing multiple parties in a single transaction, except when they concurrently represent a player and a buying club. However, this dual representation is permissible only with prior written consent from both parties (“Representation Rule”).
- Client payment requirement. Players must directly compensate their agents through the "client-pays" model. Previously, clubs could cover these expenses on behalf of the player, which often led to complications related to benefit-in-kind taxes (“Client Pays Rule”).
In a series of legal challenges, agent associations across Europe have contested the validity of the FFAR and corresponding national regulations, primarily on competition law grounds. These challenges claim that the FFAR, and especially the provisions limiting agent fees, violate European and national competition laws by imposing anti-competitive agreements and restricting competition in the football agent services market through FIFA's perceived dominance.
Legal challenge in England
In June 2023, four football agencies initiated arbitral proceedings under the FA Rules against the FA and FIFA in respect of the NFAR, which implement the new rules in England. The football agencies alleged that the NFAR breached UK competition law on the basis that it:
- would prevent, restrict and/or distort competition in the UK;
- constituted an abuse of a dominant position by the FA; and/or
- would be an unlawful restraint of trade.
The Decision
Following a five-month arbitration, the Tribunal concluded in November 2023 that the Agent Fee Cap constitutes an anti-competitive horizontal purchasing agreement among football clubs. Moreover, the Tribunal found that the potential implementation of both the Agent Fee Cap and the Pro-Rata Payments Rule would constitute a restriction of competition by both object and effect, and an abuse of the FA's dominant position within the market for players’ services. The Tribunal did not deem the Representation Rule nor the Client Pays Rule to breach UK competition law, and can accordingly be implemented in England.
Wider implications of the FFAR
The FFAR’s implementation has been contentious, and has been challenged in several jurisdictions, mainly on competition law grounds, and on the basis that FIFA do not have a mandate to regulate the activities of agents in the relevant jurisdictions.
On 24 July 2023, the Court of Arbitration for Sport (“CAS”) issued a unanimous ruling effectively dismissing all claims brought by the Professional Football Agents Association against FIFA.[2] FIFA successfully refuted each of the association’s claims, arguing that the FFAR constituted a lawful regulatory framework crucial for ensuring the proper functioning of the international transfer system and safeguarding the integrity of football. In the UK arbitration, this ruling was distinguished on the basis that the CAS had not considered the point that the Agent Fee Cap operates as a buyers’ cartel, and had instead analysed it as a vertical agreement imposing a maximum resale price; and the Tribunal ultimately having had better access to relevant documentary disclosure.
Challenges in Germany, particularly on competition law grounds, led to a preliminary reference to the Court of Justice of the European Union (“CJEU”) by the Mainz Regional Court in March 2023. Pending the outcome of the CJEU referral, in May 2023 the Dortmund Regional Court issued an injunction against FIFA and the German FA, temporarily halting the implementation of specific components of the FFAR – including the four key changes outlined in this article. This injunction was prompted by the court having found evidence that FIFA and the German FA had unlawfully abused their dominant positions.
Current status of the FFAR
On 30 December 2023, shortly before the winter transfer window, FIFA issued Circular 1873 (“Circular”)[3] declaring a temporary worldwide suspension of the FFAR rules, and equivalent implementing provisions in NFARs, impacted by the German injunction.
In England, the FA originally published revised NFAR on 21 December 2023 ahead of them coming in to force on 1 January 2024. However, further to the Decision, the FA published a further version of its NFAR on 31 December 2023, highlighting in grey those provisions which were temporarily suspended in accordance with the Circular.[4]
Consequently, whilst the FFAR and NFAR remain in force to a large extent, certain provisions within both regulations are currently suspended and unenforceable. This has caused uncertainty among agents who now find themselves navigating differing regulations across jurisdictions.
Comment
FIFA and the football clubs have argued that fee caps can protect players from exploitative practices by agents. That is potentially true in some circumstances, although it omits to mention that caps also protect the clubs. In any event, the Decision found that imposing such caps stifles fair competition within the ecosystem of football, and is against the rules. The essence of competition law lies in fostering a level playing field where market forces dictate fair prices and services. These are the rules of the game, and on this occasion FIFA crossed a line, and received a booking. As we know, this can happen even to the best players, but ultimately the welfare of all participants will be protected if the rules of fair competition, and an open market, are respected, and any future interventions will need to take that carefully into account.
[1] https://www.thefa.com/news/2023/dec/14/fa-rule-k-arbitration-published-20231214
[2] https://www.tas-cas.org/fileadmin/user_upload/CAS_Award_9370.pdf
[3] https://digitalhub.fifa.com/m/76b4cdc63e42e03f/original/1873_FIFA-Football-Agent-Regulations-update-on-implementation.pdf
[4] https://www.thefa.com/football-rules-governance/policies/player-status---agents/fa-football-agent-regulations