Football transfers: Is the transfer fee about to be consigned to history?

It has become every bit as integral to the game of soccer as a cup final, a hat-trick, or a league title. The transfer fee – the act of paying a sum of money for the right to move a player from club to club – has been in existence in one form or another for over a century.

The associated gossip, fees, contract lengths and buy out clauses are woven into the fabric of the world game, and elicit just as much intrigue and breathless column inches as any actual match.

Yet the transfer fee may about to be consigned to history.

Friday will see a legal case launched against world governing body FIFA at the European Commission in the Belgium’s capital Brussels by FIFPro, a trade union that represents the interests of soccer players worldwide.

They will contend that the current system of transfer fees is uniquely unfair, uncompetitive and an intolerable restriction on the free movement of trade.

No other industry, they argue, would tolerate having to pay a prohibitive fee to attract its workers. FIFA was not immediately available for comment about FIFPro’s legal action.

Soccer players, FIFPro says, are workers just like everyone else.

“The current system is failing,” said Theo van Seggelen, FIFPro’s general secretary. “Not just for the players, but for the clubs too.”

Bosman 2.0?

The move has been dubbed Bosman 2.0, after a little known Belgian player called Jean Marc Bosman who unexpectedly won a 1995 court case at the European Court of Justice against the Belgian Football Federation.

The victory sparked a revolution in how the business of soccer was conducted.

Previously clubs had to pay a transfer fee even if a player’s contract had finished. Bosman, then a journeyman midfielder, sued and effectively won the right for all players to move freely at the end of their contracts.

The current system, reformed by FIFA in 2001 under pressure by the European Commission, was meant to be a compromise between the clubs, players’ union, and the game’s governing bodies.

The old transfer system was retained – albeit with set “transfer windows” – but players would be allowed to buy out their contacts after a “protected period”: three years into a player’s contract if they are under 28 years old, two years if they are over 28.

The new rules, which would be tough to enforce under European Union employment laws in any other industry, had been accepted in the hope that it would deflate transfer fees, create contract stability for players and clubs whilst promoting competitive balance within leagues.

FIFPro now believes those rules haven’t just failed, but are doing the exact opposite of what they set out to do.

“I think it’s difficult to think of any labor market where you have these contractual restraints,” said Professor Stefan Szymanski, co author of “Soccernomics,” who has researched the state of the current transfer system for FIFPro.

“You have ‘gardening leave’ for example. When an employer can see a harm, or an employee could take business secrets with them. There’s mechanisms for delay and compensation,” add Professor Szymanski.

“But all of that has to be proven. And it is not punitive. But that is what this system does. It holds players hostage.”

Gilded cages

At first glance, it would appear that players are the last group of people in need of having their livelihoods protected.

Wages in Europe’s top leagues have exploded since the Bosman ruling, as have transfer fees. As much as $1.5 billion was spent in English soccer this summer during the transfer window, a record bonanza fueled by booming domestic and foreign television rights deals for the English Premier League.

Further down the food chain, things have looked less rosy.

“This is not about feeling sorry for Cristiano Ronaldo,” says Professor Szymanski. “There are very few players on multi-million dollar contracts.”

According to Professor Szymanski, the median revenue for European clubs is $2.8 million. “65% of that goes on wages. If you take a 25 man squad, it means that in a top European division a player will earn $75,000 a year.

“Everyone understands it is a short career. Tens of thousands of highly skilled individuals are not being treated fairly.”

Yet many within soccer see the transfer fee as a vital tool for redistributing money down the food chain.

“In general the system functions well, and plays an important role in the redistribution of resources from top to bottom,” said a spokesperson for the European Club Association, which represents the continent’s biggest teams.

“It also ensures a fair balance between contractual stability and free movement of players.”

The ECA’s chairman, Bayern Munich’s Karl-Heinz Rummenigge, had already warned FIFPro about launching a legal challenge to the current system whilst highlighting what he saw as the real reason for the current problems.

“The Bosman case is responsible for everything,” Rummenigge was quoted as saying. “The result in the end has been paid by the smaller countries.”

Bosman’s Year Zero

Jean-Louis Dupont rarely answers questions about the Bosman case these days.

Back in 1995, he was a young lawyer who took on the case expecting little success. But his masterminding of the Bosman victory sent shock waves through the game.

“It is always amazing to see politicians advocating such exemptions,” he says when asked why soccer should be treated differently to any other employer.

“When you see the level of corruption affecting international sport federations, do you really think that exempting them from law would be a good idea?”

He spends most of his time concentrating on cases concerning Financial Fair Play, which was introduced by European governing body UEFA as a way of dealing with soccer clubs’ debt problems, but rejects that Bosman is responsible for the game’s ills.

Transfer fees can be justified, he believes, as they are “just the agreed price to be paid by the new club to the former club in order to avoid litigation” over how they should be compensated.

The problem, he says, is that FIFA, and its resolution body CAS, have built up “case-law that deters players from terminating their contracts which inflates the transfer fees.”

The most famous case follows Article 17 of FIFA’s rules agreed in 2001.

Players could breach their contract under certain conditions, namely when the breach was outside the contracted period. When Brazilian midfielder Matuzalém decided to break his contract with Ukrainian giants Shakhtar Donetsk, three years into his five-year deal, to join Real Zaragoza in Spain, it appeared he had every right to do so.

But FIFA deemed that compensation was owed to Shakhtar, and after a round of judgments at CAS, Matuzalém was ordered to pay $13.7 million more than he was likely to earn during the rest of his career.

The case was eventually thrown out in a Swiss court but the precedent within soccer remains.

“In my view – the legality of the case-law is highly questionable,” said Dupont.

Another issue is the so called “trickle down” effect, where money paid by big clubs in transfer fees “trickles down” to the smaller clubs that find and nurture the players in the first place.

“The abolition of the transfer system would create an even bigger gap between the clubs from leagues with high TV/commercial revenues and clubs from smaller nations that heavily depend on transfer fee income,” said the ECA.

But Professor Szymanski believes this to be a bad way to circulate money within the game.

“There clearly are cases when sports clubs make this money, not big money, but even this small amounts is a very inefficient way of subsidizing grass roots,” he says.

It’s estimated by FIFPro that over 70% of all transfer fees are traded between the big clubs within Europe’s top five leagues.

A post transfer fee world

There is one question that few people can answer: What would a post transfer fee world look like given FIFPro has not outlined what system they would like to see replace the current one?

Professor Szymanski points to how professional sports in the U.S. are run and where “collective bargaining goes on and employee and employer rights are upheld.” In baseball for example, any breach of contract sees that player’s contract terminated making him a free agent.

But this system too has its dangers.

“In the football transfer system players have the final say in whether they want to be transferred or not – unlike in the U.S.,” says the ECA. “A system where baseball players are traded without their consent … would be unthinkable in Europe and very likely even illegal”

Back in 1995, few thought the case of a little known Belgian midfielder would have any long term effect.

Exactly two decades on, Bosman’s influence is still being debated. FIFPro’s petition is a similar long shot, but if it is successful its effects could be far greater.

Or, as FIFPro, contends, soccer will find a way.

“If there is no transfer system [following a successful judgment] then I am not nervous about it for one second,” said FIFPro’s Theo van Seggelen.

“I am not afraid at all. If a player ends his contract and finds another club, I don’t see how that will end football. They said the same thing after Bosman.”