On October 4, 2024, the Court of Justice delivered its preliminary ruling in a case involving Federation Internationale de Football Association (“FIFA”) and a former professional football player.[1] The Court of Justice found that certain provisions within FIFA’s transfer rules, specifically those related to the termination of player contracts, had the same effect as no-poach agreements and, therefore, constituted “by-object” infringements of EU competition law.
The FIFA Player Transfer Market and the Rules under Scrutiny
The case centered around FIFA’s Regulations on the Status and Transfer of Players (“RSTP”). Under the RSTP, a professional football player registered with one national football association can only register at a new association, once the latter receives an International Transfer Certificate (“ICT”) from the previous relevant football association. The ICT is only issued if there is no unresolved dispute between the player and their former club over the termination of their contract.
The contested rules stipulate in essence that if the original football club considers that the player terminated their contract “without just cause” (i) the player is liable to compensate their former club; (ii) any new club that signs the player will be jointly and severally liable for the compensation; and, (iii) the new club is presumed to have induced the player to terminate their contract, and will face sanctions if they sign-up the player within the first three seasons or three years (whichever ends first) of the player’s contract with their former club (defined as the “Protected Period”).
The Court of Justice’s Judgment
The Court of Justice’s ruling follows a preliminary reference by the Appeal Court of Mons (Belgium), which sought clarification on whether these RSTP provisions violated among other things Article 101 TFEU, prohibiting restrictive agreements between undertakings.
The Court of Justice concluded that the RSTP had an effect comparable to a no-poach agreement between all football clubs throughout the EU, resulting in a “generalised, drastic, and permanent” restriction of competition.[2] The Court of Justice considered several factors:
- Uncertainty in Compensation. The method for calculating the compensation owed by the player and potentially the new club for terminating the relevant contract before its term is discretionary, increasing the uncertainty and making the amount unpredictable.
- Barrier to Player Mobility. Players who terminate their contracts prematurely and are alleged by their former club to have terminated “without just cause,” are effectively barred from moving to a new club in another EU Member State. The ICT cannot be issued if there is any ongoing dispute (which in turn could potentially jeopardize a player’s career).
- Liability and Sanctions for New Clubs. Clubs signing players in these circumstances risk (i) being held jointly and severally liable to pay compensation; (ii) being presumed to have incited the player to terminate their previous contract; and, (iii) exposing themselves to severe sporting sanctions if they signed the player during the Protected Period, i.e., being barred from playing at any FIFA competition.
Given that in professional football, the ability to recruit talent is an essential parameter of competition, the Court of Justice considered, in line with the Advocate General’s opinion,[3] that the rules at issue were impeding clubs from different Member States from competing freely. By doing so, FIFA’s transfer rules allowed football clubs to retain their players, with near certainty, for the entire duration of their contracts. The resulting allocation of key resources, and partitioning of the market, thus severely distorted competition between football clubs and, given the likely severe impact on competition, constituted a by-object infringement.
Ancillary Restraint Argument
The Court of Justice also assessed whether the rules could benefit from the so-called ancillary restraint exemption which allows restrictions that serve a legitimate non-economic objective in a proportionate manner to fall outside the scope of anticompetitive agreements under Article 101 TFEU (e.g., rules protecting the health and safety of players, the stability of teams during a championship season, or a level playing field among teams). The Court of Justice reaffirmed its earlier stance in the European Superleague Company judgment, that the ancillary restraints exemption cannot apply to by-object infringements.[4] In the circumstances this meant the RSTP could not qualify as ancillary.
Exemption under Article 101(3) TFEU
Similarly, the Court of Justice assessed whether the objective economic benefits of the rules at stake could outweigh the negative effects on competition, i.e., whether the rules could be exempted under Article 101(3) TFEU. This is the case when the anticompetitive agreement allows for efficiency gains that are at least partially passed on to customers. The competitive restrictions must also be indispensable, proportionate, and not eliminate all competition.
In the Court of Justice ruling, the court sets out in detail the conditions that need to be met in order for Article 101(3) TFEU to be applicable. While deferring to the relevant national court, the Court of Justice points out in particular that the FIFA rules do not seem proportionate or indispensable, resulting in a “generalised, drastic, and permanent” effect making international transfers of players almost impossible while under contract.
Implications
While the Court of Justice’s judgment concerns the niche market of professional football players, it reflects broader trends in EU competition law enforcement.
- Increased Scrutiny. The Court of Justice’s judgment aligns with the European Commission’s (“Commission”) May 3, 2024, policy brief on antitrust in labor markets, which emphasized heightened enforcement against labor market restrictions.[5] The Commission underscored that it would treat no-poach agreements as “by-object” infringements.[6]
The Court of Justice’s conclusion that FIFA’s rules resulted in the allocation of a key competitive resource (i.e., professional football players) among competitors mirrored the Commission’s approach that no-poach agreements constitute supply-source sharing agreements expressly prohibited under Article 101(1)(c) TFEU.
- Agreements Restricting Demand. The Court of Justice reiterated that agreements between undertakings do not need to concern their supply of goods or services. Instead, they can relate to “resources of any kind which the undertakings need to produce those goods or services, and therefore demand”.[7] In any event, the Court of Justice confirmed its previous judgment in Royal Antwerp Football Club that the recruitment of highly trained professionals (in this case professional football players) constitutes an essential resource for the supply of services downstream, i.e., national or international football competitions.[8]
- Possible Exemptions. Interestingly, while the Court of Justice applies a very strict approach to the FIFA rules and the RSTP, it studiously left open the possibility that sporting rules, for example, are limited to ensuring the stability of football teams during a season or the “homogeneity” of competitions. Therefore, these may escape Article 101 TFEU altogether or at least benefit from an Article 101(3) TFEU exemption if these restrictions are strictly proportional and/or temporary.
- Applications to Other Sectors. Although the market for professional football players is highly specific, the Court of Justice’s findings can in principle be applied to other sectors. The Court of Justice’s reference to “highly trained professionals” suggests that the principles deduced from the FIFA rules may extend to other areas and professional rules such as in the engineering, IT, or medical sectors, where talent is similarly a critical resource.
- Free Movement of Workers. No-poach agreements that restrict workers from moving between Member States can also infringe upon one of the European Union’s fundamental freedoms: the free movement of workers. In its judgment on the FIFA case, the Court of Justice confirmed that the contested rules could create an illegitimate barrier to this freedom. As a result, no-poach agreements not only restrict competition but may also violate European Union fundamental freedoms, by limiting their ability to work across borders.
Conclusion
The Court of Justice’s judgment has impacted FIFA directly. FIFA announced plans to revise its transfer rules by opening a dialogue with key stakeholders. Additionally, the ruling has exposed FIFA to potential damages claims from professional football players (and clubs) affected by these longstanding rules, which have been in effect since 2001.
This judgment aligns with the Commission’s broader approach over the last year which encourages the investigation of anticompetitive agreements on the labor market.
[1] FIFA (Case C-650/22) EU:C:2024:824.
[2] Ibid., para. 145.
[3] See Cleary Antitrust Watch blog, “Advocate General Szpunar finds FIFA rules on transfer of players contrary to Articles 101 and 45 TFEU,” April 30, 2024, available here.
[4] European Superleague Company (Case C-333/21) EU:C:2023:1011, para. 183. See also Cleary Antitrust Watch blog, “Revolution For Sport Gatekeepers? The Grand Chamber Of The Court Of Justice Rules On The European Super League And International Skating Union Cases,” December 21, 2023, also published in the December 2023 EU Competition Law Newsletter, available here.
[5] See Cleary Antitrust Watch blog, “Turning up the Heat: the Commission’s Interest in Labor Markets,” May 3, 2024, available here.
[6] Ibid.
[7] FIFA (Case C-650/22) EU:C:2024:824, para. 129.
[8] Royal Antwerp Football Club(Case C-680/21) EU:C:2023:1010, paras. 107, 109, and 110.