Colombian soccer player Radamel Falcao was a big star at Spain’s Atlético Madrid, netting 31 goals in the 2012-13 season and leading the cash-starved team to domestic and European glory. But when France’s AS Monaco bought Falcao at season’s end for around €60 million, most of the money went to a private equity fund that owned his playing rights.
Most fans couldn’t care less about Falcao’s precise ownership — but FIFA did. Earlier this year, the world soccer governing body prohibited investors from taking shares in soccer players.
And now the European Commission is formally investigating that ban, POLITICO has learned, adding the high-profile world of global soccer to the already packed agenda of EU antitrust investigators, and thrusting Brussels into an emotional debate at the heart of Europe’s favorite sport.
The Portuguese soccer league and La Liga, Spain’s top division, sought the probe because they worry that the FIFA ban will handicap poorer European clubs by removing an important source of revenue.
They want Margrethe Vestager, the European Commissioner for competition, to find that scandal-ridden FIFA has abused its dominant position over world football by adopting rules that unduly favor the wealthy U.K. Premier League, whose TV revenues at €2.2 billion are more than double those of La Liga. They also argue that the prohibition breaches certain EU economic rights, like the free movement of capital and workers.
The Commission, which could strike down down the ban on the basis that it harms fair competition, quizzed European soccer leagues and associations in July, according to sources familiar with the process.
In Europe, there are around 1,500 players who are part-owned or paid by outside investors and are collectively worth an estimated €1 billion.
To the scheme’s supporters, the crucial question is whether Europe’s smaller clubs can access the financial firepower necessary to challenge the wealthy Goliaths of modern soccer, who sit atop a €20 billion industry. They say that investors can help bridge the widening gap in revenues between Europe’s dominant clubs and the rest.
By contrast, detractors say the practice has no place in sport.
Michel Platini, the president of UEFA, the governing body for soccer in Europe, and Richard Scudamore, the chief executive of the Premier League, the U.K.’s top division of soccer, have described the practice as “slavery.”
Under so-called third-party ownership models — or TPOs — an investor buys a stake in a player or pays his salary in exchange for a share of future transfer fees. The scheme can prove very lucrative: Sporting Lisbon signed Argentine soccer star Marcos Rojo in 2012, paying €3 million with the help of an investor, and sold him two years later for €20 million.
TPOs are very common among the cash-strapped clubs of South America and in parts of Eastern and Southeastern Europe, where the consultancy KPMG estimates that almost half of all players belong to an investor. In Portugal, KPMG estimates that investors own one in 10 of all players, though they represent about 30 percent of all player value.
TPO supporters describe it as an alternate source of financing which is, in principle, little different from the million-euro bank-loans extended to soccer’s elite clubs.
“Our support to numerous clubs has helped them compete at the top level in world soccer,” says Nélio Lucas, CEO of Doyen Sports Investments. The Maltese-based fund, which has also filed a complaint with the Commission, says it has invested €100 million into soccer.
That money, Lucas says, has helped bring to Europe stars such as Falcao, Colombia’s Jaime Rodríguez, Brazil’s David Luiz and Argentina’s Angel de María.
All those players made their names at clubs like Atlético Madrid, Sevilla and Porto, whose revenues are as little as a quarter of those of high-earning clubs such as Paris Saint-Germain or Manchester United. More generally, clubs in Spain — whose economy has been through a deep recession — on average earn far less than their U.K. counterparts, who benefit from Europe’s largest pay-TV deals. That translates into transfer fees, with Premier League clubs spending almost three times as Spanish La Liga clubs during the past winter season.
But that has not stopped Sevilla from winning two Europa Leagues back-to-back, nor Atlético Madrid from wrestling the Spanish championship from Real Madrid and Barcelona.
Clubs like Sevilla and Atlético Madrid are now concerned that FIFA’s prohibition will consign that business model and their success to the history books.
“Those teams use funds and it allowed them to get top-level players like Falcao,” says Miguel García Caba, a lawyer at La Liga. “We need to be able to use tools that allow us to compete for cups and players with clubs that have more resources.”
La Liga believes that player investors should be regulated, not banned. García Caba echoed fears that the U.K.’s Premier League’s superior revenues would soon see it emerge as a European super-league.
There are similar concerns in the smaller Portuguese league.
One leading soccer agent from the country, speaking to POLITICO on condition of anonymity because of the controversy around the ban, said: “It means that Portuguese clubs will not be able to spend €12 million on a player, but just €5 million or €3 million. The level will go down: Next time we play Real Madrid, we will lose 6-0.”
Vestager can probe FIFA on the basis that it holds a dominant position over soccer and must act fairly.
“[We] can indeed confirm that it has received a complaint on the matter,” said the Commission in a statement when asked to comment on the case. It added that it could not “comment further on it as the assessment is ongoing.”
‘Danger to the game’
FIFA did not respond to a request for comment. In a statement, UEFA said: “We have long argued that TPO is bad for players, bad for contractual stability and bad for the integrity of our sport.”
To succeed, those asking for the ban to be overturned must persuade the Commission that it is disproportionate.
In support of their claim, they can rely on an opinion issued in early July by the Spanish competition authority.
The Spanish antitrust regulator concluded that the ban “seems to violate basic regulatory principles laid down by the highest national bodies and those of the EU.”
It would accentuate the “extreme polarization” between rich and poor clubs, the Spanish regulator said, before concluding that FIFA’s action was “disproportionate”.
Yet there are many in the world of European soccer that firmly believe that the ban is both appropriate and desperately needed to halt a practice that can introduce conflicting interests into the game and put pressure on players to seek a transfer.
This includes FIFPro, the world union for soccer players, which together with UEFA has itself filed an antitrust complaint asking the Commission to go one step further than FIFA and declare all existing TPOs immediately illegal.
“It seems to me that the TPO is a danger in many respects to the soccer,” said Emilio Abejón, the chairman of FASFE, an association of Spanish fans, and a supporter of Atlético Madrid. He admits that opinion among fans is divided. “[FASFE’s] opinion is that the funds contribute to creating bubbles: No one could believe that Falcao was bought for €60 million. If you didn’t have funds you wouldn’t have transfers of these sizes.”
Raffaele Poli, the head of the CIES Football Observatory in Switzerland, is against the TPO system, but thinks the real problem runs much deeper:
“The transfer system, with or without third party ownership, is debatable in itself. TPO is aggravating the problem, but not creating it.”
Neither La Liga, nor Doyen Sports, nor the Premier League are arguing for an end to million-euro transfers. But Poli’s arguments may resonate in Brussels. It was after all European law that created the free transfer, which revolutionized European soccer in 1995.
Vestager opens soccer ‘slavery’ probe – POLITICO.