Wednesday, February 11, 2015

Restraint of Trade, Competition Law and the Transfer Window: a Level Playing Field?

The January transfer window has once again brought allegations that a Premier League club has made an ‘illegal approach’ to sign a player without involving his current club. This puts the issue of restraint of trade and the FA transfer rules under scrutiny yet again. The differences between the FA rules and the FIFA rules on transfers effectively mean that a player for an English club who wants to move to another English club is at a disadvantage against his overseas counterparts due to having substantially less time to negotiate a new contract. There are recurring questions that arise: do the FA rules on transfers constitute a restraint of trade? Are English clubs disadvantaged in a manner prohibited by competition law?

Restraint of Trade

Football players are employees and are therefore covered by the normal rules of employment law, both at common law and under employment legislation. Under the doctrine of restraint of trade, any contractual term which purports to restrict an individual’s freedom to work for others or carry out his trade or business is void and unenforceable, unless the employer can show that it has a legitimate proprietary interest that requires protection and the protection sought is no more than is reasonable.

Football Association Rules

Section C1 of the FA rules (and Section T of the Premier League Rules) prevents a player who is under contract, or his agent, from talking to other clubs, or being approached by other clubs, without the consent of the player’s current club. This can be a problem for players in the final year of their contracts who wish to move clubs when their contract expires.

Subject to limited exceptions, players’ contracts, regardless of duration, must end on 30 June in a given year. FA rules state that within 7 days of the first Saturday in May (or the last game of the season) a club must either offer its player a new contract or confirm it is releasing him. If the club releases the player, he is free from that moment to negotiate directly with another club. If the player is offered an extension, he must confirm within 28 days whether this offer is accepted or rejected. Again, from the moment an offer is rejected, the player is free to negotiate with other clubs.

Crucially, the above rules apply only to negotiations with English clubs. A player is free to negotiate directly with foreign clubs, including those in the EU, up to 6 months before the expiry of his contract.

FIFA Rules

FA and Premier League rules are much more restrictive than the FIFA rules, which allow players to negotiate directly with other clubs within the last 6 months of their contracts. This creates a situation whereby players for non-English clubs are free to negotiate with both domestic and foreign clubs for a full 6 months before the end of their contract, whereas players for English clubs who wish to remain in England must wait until the final month of their contract to commence negotiations.

There is therefore a period of 5 months during which, arguably, any number of opportunities may be lost to those who play for English clubs, potentially putting those players at a significant disadvantage as against their overseas counterparts.

No wonder then that ‘tapping up’- negotiations directly between a player/his agent and a prospective club without his current club’s knowledge or consent – is reported to be a widespread component of negotiations between clubs, agents, managers and players months in advance of the expiry of a player’s contract.

Do the Rules Constitute Restraint of Trade?

It seems clear that there is a restriction in the FA rules which limits an individual’s freedom to work for others, thereby fulfilling this element of the doctrine of restraint of trade. However, if the restriction is reasonable and necessary to protect a proprietary interest, the restriction will be valid and enforceable.

Are the Rules Reasonable and Necessary?

Whatever their chosen field, employees are not normally restricted in the same way that footballers are restricted under the FA rules. Employees are generally free to contact and negotiate with prospective new employers at any time during their contract of employment, provided this does not interfere with their current contractual obligations. It is normal in many lines of business for employees to be actively headhunted by competitors. By comparison, the restrictions on football players seem disproportionate.

One argument in defence of the rules is that if the restrictions were lifted, there would be a transfer free-for-all with players and clubs able to discuss any number of prospective signings without the prior consent of their current club. Arguably there would be potential for the wealthiest clubs to approach and sign any player they like by offering terms that less wealthy clubs simply cannot match. The counter-argument is that every club has a budget within which it must operate and there is no clear reason the budget should be cast aside if discussions were to take place openly 6 months in advance of the end of the player’s contract. Though accurate information is not available, it is frequently reported that these discussions take place anyway, often via a chain of agents. As it seems probable that transfer arrangements would proceed much as they always have in the absence of the FA rules, the FA rules cannot help but appear ineffectual and unnecessary,

In addition, the FA restrictions are much more onerous than those of FIFA, putting players for English clubs at a disadvantage in terms of the period of negotiation. The FA rules might appear more reasonable if every other football governing body had the same policies, but the significant differences indicate that the FA rules are unnecessarily restrictive and puts English clubs in a disadvantaged position. Again, this strongly suggests that the rules are disproportionate, unnecessary and unreasonable.

In 2005 Ashley Cole was widely reported to be preparing to argue before the Court of Arbitration for Sport that the Premier League rules on tapping up amounted to an unreasonable restraint of trade. This followed the fining of Cole, Chelsea FC and José Mourinho, all of whom were found guilty of conducting secret negotiations in breach of Premier League rules in 2005. Ultimately, however, Cole did not commence a restraint of trade action, a decision welcomed at the time by the football governing bodies who feared another Bosman-style upheaval to the transfer market.

Nevertheless, it would appear that there is scope to challenge the FA rules on the basis that they constitute an unreasonable restraint of trade and breach of competition law. Unless the restrictions in the rules are amended to be brought in line with those of FIFA, it seems that allegations of tapping up will continue to plague the transfer window. One point that might be crucial in any challenge is the few English players who actually go abroad. Perhaps the effect is de minimis and therefore the stuff of tabloid speculation!

Competition Law?

Competition law may provide a more fruitful avenue of attack. The argument being that English clubs are disadvantaged in acquiring or retaining the services of footballers compared to clubs outside England by rules that favour such clubs. This unequal treatment distorts competition between clubs. A key threshold question here is whether the players have agreed to the transfer rules. If so, it might be argued that there is a collective agreement and so arguably the issue falls outside competition law. If not, the argument is possible, although a club would have to go through football’s arbitration system first rather than going to a court which is a big deterrent (as it is meant to be). Once again, the absence of market impact could mean that an ultimate finding might be that the effect on competition is de minimis.

Stephen Hornsby

Partner

shornsby@gdlaw.co.uk

Chris Smith

Solicitor
csmith@gdlaw.co.uk

This article was originally published on the Goodman Derrick LLP internet site. To access the original, click here.