Is Football Facing the Abolition of Transfer Fees?

19 September 2000

Sam Rush

The name Massimo Lombardo may not capture the imagination in quite the same way as the more celebrated beneficiaries of football's transfer system such as Luis Figo, Nicolas Anelka and Marc Overmars but in recent times Lombardo has been indirectly responsible for more column inches than most of the footballing community put together. Lombardo was coming to the end of his contract with Swiss Club Zurich Grasshoppers in 1998 when he was the subject of an enquiry from the Italian club Perrugia. Lombardo is the holder of both Swiss and Italian passports and Grasshoppers demanded a fee for his services on the basis that he was Swiss and not part of the European Community. Perrugia refused to pay a fee and subsequently complained to the European Commission that the payment of a transfer fee represented a barrier to the basic principle of free movement and thus started the chain of events which has ultimately led to the proposed abolition of the football transfer system.

The Commission ultimately ruled in favour of Perrugia and their study of the case led them to instigate a review of football's entire transfer system. After nearly two years of deliberations it is clear that football is facing major changes and the involvement of the Prime Minister and other European leaders has exemplified the seriousness with which the issue is being treated. Not since 1995 when Jean-Marc Bosman ensured that players were able to move freely at the end of their contract have legal proceedings so dramatically threatened to alter the footballing landscape.

It is a fundamental principle of European law that the movement of goods, capital, people and labour cannot be restricted within the European Union. The European Commission has found that the existing industry practice in football to insist on a fee from the buying club when a player is in contract, amounts to an unacceptable restriction on that player's ability to earn a living. The Commission, through the Commissioner for Sport, Viviane Reding and Mario Monti, the Competition Commissioner have also stated that transfer fees are a considerable restraint on competition and/or distortion of competition in the market of sports professionals believing that the level of transfer fees paid and received by the top clubs reinforces their dominant position. The Commission has further argued that the high level of the transfer fees means that small clubs are only able to hire top players in very exceptional cases, resulting in the richer clubs maintaining their dominant position.

Fortunately, conciliatory sounds have been emanating from the European Commission in recent days and the revised system put forward by FIFA, accepting that while the transfer system required modifications its abolition was not necessary, may well ensure that a form of the system is retained. FIFA have suggested that there should be no international transfers on players under 18, compensation to a club selling a player aged 18-24 who has been developed by that club, no transfer fees for those players aged over 24 and minimum one year contracts. Although the Commission has suggested that it would not be averse to the concept of a development fee, its preference remains for any form of compensation to be based on wage payments for the remaining term of a player's contract. All this leaves the game in a state of flux and awash with concerns over its future. However, on the basis that the transfer system will change, football needs to adapt its working practices to ensure that the implications are not too damaging.

Players' contracts are currently quite simple standard documents with the contentious issues usually revolving around remuneration. It is likely, however, that the advent of a revised transfer system will lead to more complex, sophisticated documents with the dominant issues likely to be notice provisions and bonus structures to encourage players to remain with clubs beyond an initial one year term. Both the bonus structures and the basic remuneration of top players are likely to be significantly increased and, with no money to pay on transfers, the growth in salaries which was first seen as a result of Bosman is likely to be magnified further. Although it has been assumed that players will be the beneficiaries of the new developments, clubs will benefit from the opportunity to serve notice on unwanted players and potentially put any disruptive players on gardening leave. Clubs may, however, have to come to terms with the loss of transfer revenues and the implications of assets worth tens of millions of pounds suddenly being vastly reduced.

For players, they will have to ensure that they achieve the desired balance between availability and security. For clubs, contentious issues are likely to centre on the concept of development and how compensation will be agreed. Further, clubs may not be willing to pay heavy insurance premiums to cover players who are away on international duty while it is not clear who would pay compensation should a player be injured. As the European Commission strives to turn footballer's into true employees and clubs into good employers, football will simply mirror the workplace at large where individuals move from job to job, where the bad will be released, the good will be incentivised to stay and the successful employers will run profitable businesses.

First published in The Times in September 2000.