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Will Fifa’s cap on commissions curb agent ‘excesses’?

Fifa’s proposals to cap agent commissions has set it on a collision course with some of the most powerful agents in world football. In this explainer, Ben Cronin outlines the reasoning behind the reforms and the legal arguments for and against them.

When the Fifa Council unanimously endorsed a series of proposals to change the rules governing player representation last September, it set itself on a collision course with some of the most powerful agents in world football.

Having adopted a light-touch approach to intermediaries in the preceding years, the governing body was serving notice of its intention to impose a far more rigid set of rules moving forwards.

Fifa said the reforms were the result of an “extensive consultation process” with players, clubs, leagues, member associations, and even agents, adding that the new proposals were designed to: “eliminate or at least reduce the abusive and excessive practices which unfortunately have existed in football.”

But bodies representing agents from across Europe complain that that they were not sufficiently consulted in the process and the new rules contravene EU competition law.

The most divisive measure in the new regulations is a provision to cap what Fifa deems to be the exorbitant fees levied by agents on player transfers. Agent associations say this is tantamount to a restraint of trade and are threatening legal action across several jurisdictions.

Why is Fifa changing its player representation regulations?

Fifa’s chief legal officer, Emilio García Silvero, conceded last year that the governing body had been wrong in 2015 to de-regulate its Regulations on Working with Intermediaries (RWWI) and devolve responsibility for the agent market to each of its national associations.

Fifa’s justification for deregulation was that player representatives were circumventing the existing system anyway, with just 25-30 per cent of transfers being conducted by a licensed agent.

But Richard Parrish, professor of Sports Law at Edge Hill University and author of an EU-funded investigation of the transfer market, argues there were other factors at play.

“The formal reason was that up to three-quarters of international transfers were being conducted without a licensed agent,” he says. “The informal reason was it was just a pain for Fifa to administer.”

The decision to devolve the regulations to national associations led to considerable variations in approaches, making some markets more attractive to do business than others. Deregulation was also blamed for making it easier for corruption to flourish and for an explosion in the numbers of people claiming to represent players.

What changes is Fifa planning to make to RWWI now?

Fifa plans to re-introduce a mandatory licensing system for agents that it will administer centrally through a web-based examination.

It will also create a clearing house for transfers to improve financial transparency and ensure selling clubs receive solidarity payments for players and offer a dispute resolution service (both through Fifa and the Court of Arbitration for Sport) to address disagreements between agents, players and clubs.

“The Fifa Clearing House will be operational from 1 January 2021,” a Fifa spokesperson tells SportBusiness. “It will begin with the processing of training compensation and solidarity payments. Payment of agent commissions through the Fifa Clearing House is currently scheduled to be implemented in the 2022 calendar year.”

More controversially, the governing body proposes placing limits on agent commissions to 10 per cent of the transfer fee in cases where they represent a releasing club, three per cent of the player’s remuneration in cases where they represent a player, and the equivalent of three per cent of the player’s remuneration when they represent an engaging club.

Additionally, Fifa plans to limit the number of parties an agent can represent in a single deal to avoid conflicts of interest. This appears to be a response to cases such as Paul Pogba’s transfer from Juventus to Manchester United, in which agent Mino Raiola is reported to have represented three parties in the deal: Pogba, the selling club and the buying club. Fifa says dual representation will be allowed under the new regulations, but only where the agent represents the player and the engaging club and the interests are aligned (because the more a buying club saves on a transfer fee, the more it can pay the new player in wages).

The Fifa spokesperson said agent commissions should be paid by the party using the services of the agent. This appears to be an attempt get players to pay agent commissions – a departure from the prevailing practice in which the engaging club pays for this player benefit.

Agent Mino Raiola is reported to have represented three parties in the sale of Paul Pogba to Manchester United: the player, the selling club and the buying club (Clive Brunskill/Getty Images)

What do agents think of the proposals?

Though not a profession that is typically associated with collective action, agents have responded by organising themselves into different associations which are urging members to contribute towards the expensive legal fight to block the cap on commissions.

The most influential lobbying groups appear to be the European Football Agents Association (EFAA) and the Football Agents’ Forum (FAF). EFAA is a supra-national organisation, founded in 2007, that represents the interests of 18 individual agent associations across. It counts ‘super agents’ Jonathan Barnett and Jorges Mendes among its members, as well as Rob Jansen, EVP and managing executive of global football for Wasserman. FAF is a smaller organisation whose members include Mino Raiola, Barnett and Roger Wittmann’s Rogon agency.

Roberto Branco Martins, general counsel, EFAA, tells SportBusiness that its members might welcome “80 per cent” of the changes to RWWI – but only if they are involved in what he describes as “an official, formal consultation process”. He says measures to connect education to agent licensing are in line with the association’s thinking, while the creation of the clearing house could provide more transparency and security in the payment of commissions.

However, the association objects to the introduction of the cap on commissions which it deems to be a contravention of EU competition law. Its legal arguments are likely to revolve around whether Fifa’s objectives of protecting players and promoting contractual stability are ‘legitimate’, whether the regulations are ‘proportionate’ under EU law and whether agent bodies were consulted enough in the process.

“Fifa has created a distortion in the market by implementing the cap and [to do that] you need to have stakeholder participation first and a proper consultation,” says Branco Martins. “And if you allow a blocking of the market, the market itself needs to be okay with it and needs to see a legitimate reason for it.

“The next test from a competition law point of view would be whether this is a proportionate measure and there’s absolutely no reason to stick to a three per-cent commission.”

EFAA argues the average agent commission is currently worth double the three per-cent figure and that the regulations will only harm smaller agents operating in the lower tiers of the game. Further up the chain, it is said the cap fails to acknowledge the cost of running a modern agency business.

“You just need a certain size in order to deliver the service to a player that he now expects,” says Dr Philipp Wehler, a partner at Hoffmann Liebs, a German law firm that worked with the Arena 11 agency that acted for Sadio Mané and Naby Keita in their transfers to Liverpool FC. “They want social media services, they want legal, they want tax, personal, they want you to find a good doctor for their granny.”

EFAA argues that the severity of the cap, combined with the eagerness of clubs to sign the best players, will only encourage them to develop increasingly elaborate measures to circumvent the new rules.

Are the new regulations set in stone?

When the Fifa Council endorses a set of proposals it is normally the prelude to them being drafted into regulations. However, Fifa says it has now decided to conduct further consultations.

“Fifa is currently developing these proposals to be turned into regulations,” a spokesperson tells SportBusiness. “This work is done in consultation with the football stakeholders, including agents’ representatives.”

It remains to be seen if the threat of legal action will encourage any further concessions towards agents.

Fifa’s headquarters in Zurich, Switzerland (by Valeriano Di Domenico/Getty Images)

Have agent associations taken any legal action?

EFAA says it is coordinating parallel legal actions against the Fifa regulations in Germany and Switzerland, on the basis that they are anti-competitive. Branco Martins says further legal action is planned in Switzerland and national agent associations are examining competition law in other countries to test the strength of cases against the global governing body in those jurisdictions. A Europe-wide position is anticipated after the EFAA’s general assembly today (13 February) in Zurich.  FAF is also understood to have written to several national associations and Fifa threatening legal challenges.

Parrish thinks agents have been right to act collectively and are likely to benefit from the standoff. “If they want to have a seat at the table, they’ve obviously got to organize themselves properly and I think they’ve done that now, particularly through the EFAA,” he says.

Although he would prefer agents to adopt a more placatory role, he acknowledges the threat of litigation has proven effective in the past.

“If you look at how the European Club Association got its power, it was through legal action,” he says. “Look at the players’ union FIFPro. Where did they get their power from? By suing Fifa. So litigation in football is often a means of flexing your muscles and getting yourself a seat at the table.”

Do the agents have a case?

The success of the agents’ case will depend on interpretations of articles 101 and 102 of the EU treaties governing EU competition law. Some sources say the agent’s argument that a cap on commissions is anti-competitive has its legal merits, although others say this ignores the political temperature in Brussels which is not thought to be favourable towards agents and the worst excesses of the industry.

Any competition dispute will be complicated by the fact the EU applies a degree of leeway to sport and football given the societal nature of the game and the need to ensure competitive balance. This is where the EFAA’s questioning of the ‘proportionality’ of the Fifa regulations comes into play.

Even if football were treated the same as other industries, sources in favour of the updated RWWI argue that a precedent for the agent cap exists already in the form of the limit placed on bankers’ bonuses that the EU introduced in 2014.

Other arguments will likely revolve around whether agents can be classified as ‘industry stakeholders’. If they are, the EFAA says argues any attempt to distort the market without consulting them is anti-competitive.

There was a sense of battle lines being drawn when agents Raiola, Jonathan Barnett and Roger Wittmann wrote to Fifa claiming they were not consulted in the draft process. Fifa has responded by providing the minutes to two meetings in 2018 where Barnett was present and one meeting where he was joined by Raiola, Wittmann and 21 other prominent agents the same year.

To the question of whether agents can even be classed as stakeholders in the first place, one interpretation is that they fall outside of this definition because they don’t make any contribution to the game. This could either be by investing in grassroots football and infrastructure, organising and regulating competitions, or indeed playing matches. Under this categorisation, they could be classed as service providers or suppliers instead.

The counter argument is that the best agents often enjoy long relationships with their clients, contribute to the development of their careers and have legitimate claim to say they serve their interests better than any player union.

Agents like Jonathan Barnett say they were not sufficiently consulted by Fifa (credit: Ian Walton/ALLSPORT

How have clubs and player unions responded to the regulations?

Football clubs have been reluctant to state a position about the new regulations on the basis that differences of opinion could be exploited by lawyers representing agent groups. But off the record some are supportive of the introduction of the cap on agent commissions.

They say the purpose of the cap is not to prevent agents from making a living but rather to remove some of the incentives to unsettle players and stimulate contractual instability. At the same time, club sources spoken to by SportBusiness were careful to stress that they appreciate the important role played by agents in facilitating complicated transfers and in allowing their players to focus on football.

One source said: “The suspicion that people will find a way around the rules is not a good enough reason not to regulate. We need to have the best possible control mechanisms and hard sanctions in place. I think this could go a long way in trying to prevent these practices [circumvention of the rule]; it won’t eliminate them, but it will help.”

The same source argues that a three per cent commission is ‘proportionate’ and is consistent with a non-compulsory guideline in Fifa’s 2015 regulations adding that the rule allowing the same agent to represent both a player and the engaging club would mean an agent commission could actually amount to a maximum of six per cent of the player’s annual salary.

By the same token, it is suggested a 10 per cent cap on the share of any transfer fee where an agent represents a selling club, also represents a significant share. In cases where an agent represents a player, it also needs to be remembered that the three per-cent or six per-cent cap would be applicable on the player’s yearly salary, meaning the agent would receive an ongoing stipend. The thinking behind this model appears to be to incentivise agents to let players see out the full term of their contracts.

To the argument that the cap on commissions will prevent agents further down the football pyramid from making a living, the same source said: “The fact that commissions are based on a percentage obviously means that they will vary in proportion with the player’s salary or the transfer fee. Three per cent or six per cent of an annual salary of €20,000 could look like a relatively small commission, but that is only the case because obviously the player’s salary itself is very low. Should an agent be entitled to 20 per cent of the salary of a player who makes €2,000 a month?”

Global player union FIFPro issued a short response to a request for comment on the new regulations: “We are strongly in favour of the player transfer market evolving so that it becomes more rational and less prone to financial speculation. We want to be sure that players are treated exclusively as athletes, and not as commercial assets.”

How might the new regulations work in practice?

Provided Fifa can win the impeding legal disputes, the next question will be whether it has the teeth to enforce a cap on commissions – especially given the industry’s propensity to circumvent any regulations thrown in its way in the past.

“If a club wants a player and an agent wants more money, they’ll just enter a side agreement to say: ‘pay me for this scouting that I did, pay me for the consultancy work that I did,’” says Parrish. “And again, that highlights why I think Fifa deregulated in 2015.”

This time, however, Fifa has promised to devote substantial resources to policing the problem and to create an investigatory chamber to identify any transgressions. Parrish would like the governing body to look past the easy media target of the agents and shine a light on the behaviour of clubs.

“Rather than just throwing the book at the agent every now and again, which happens a lot of the time, it’s the behaviour of the clubs that’s the problem,” he says.

“Once you start having clubs fined, or they start having transfer bans in the same way that we’ve seen with transfer of minors, then you’ve got half chance. But you need Fifa to be on it. And if they’re not, the Wild West will just continue on unregulated.”

Read this: Jorge Mendes: Why agents are ‘an essential part of football’s market dynamics’

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