The Court of Justice of the European Union (CJEU) and a UK arbitration panel (the Panel) have recently handed down rulings that may have significant implications for professional football, in particular for the functioning of the international player transfer market and the Premier League’s policing of its Profit and Sustainability Rules (PSR). 

First, on 25 September 2024 the Panel – having considered a number of arguments around the legality of the FA Premier League’s (FAPL) associated party transactions rules (APT Rules) – found the majority of those rules to be lawful, but concluded that certain elements of and recent amendments to the rules amounted to an infringement of competition law “by object”. Subsequently, on 4 October 2024 the CJEU declared that certain FIFA rules on international transfers of professional footballers are contrary to EU free movement and competition law.

Both rulings build on recent CJEU judgments in other high-profile cases¹, and serve to highlight further the potential for tension between the regulatory frameworks overseen by sports governing bodies and EU and UK competition law.

Manchester City Football Club Limited (MCFC) v FAPL

This case is one of several disputes between MCFC and the FAPL regarding the PSR, but is not directly connected to the FAPL’s disciplinary investigation into 115 alleged PSR breaches by MCFC dating back to 2009. Instead, it concerned allegations by MCFC that the APT Rules infringe competition law and had been applied against MCFC in a manner that was procedurally unfair.

The PSR were adopted in 2013, limiting the losses Premier League clubs can incur on their footballing activities over a specified period. The APT Rules were introduced in 2021 to replace an element of the PSR known as the related party transactions rules (RPT Rules). The APT Rules were subsequently amended in 2024. Both the RPT and APT Rules aim to ensure that club owners cannot circumvent the PSR through inflated commercial agreements between their clubs and related businesses. However, unlike the RPT Rules (which required ex-post disclosure by the clubs of any related party transactions), the APT Rules require clubs to pre-notify associated party transactions (APTs) to the FAPL for assessment of their fair market value (FMV) before the proceeds can be accessed.

MCFC objected to the APT Rules, both in their original and amended guise, on the basis that certain elements of the rules (but not the PSR system as a whole) restrict competition, in violation of Chapter I and/or II of the Competition Act 1998.

MCFC’s arguments on restriction of competition, and the Panel’s ruling

MCFC advanced five main grounds of argument. In relation to each ground, the Panel first considered whether the alleged distortion of competition amounted to a restriction of competition by object, including by reference to any differences between the 2024 APT Rules and the 2021 version. Where it did not find a restriction by object, the Panel further assessed whether the alleged distortion gave rise to anticompetitive effects – in each case concluding that no such effects had been established.

i. Timing distortions

MCFC alleged that the ex-ante system of review introduced by the APT Rules was unnecessary and caused significant delays in receiving income for clubs with sponsorship agreements with related parties (including because of the extended time taken for FMV assessments), and that this distorted competition between clubs.

The Panel disagreed that this gave rise to a restriction of competition by object, noting that the move from an ex-post to an ex-ante regime was justified by the pursuit of a legitimate objective: ensuring the effectiveness of the PSR, which are not anticompetitive in nature. An analogy here could be drawn between the APT Rules and EU state aid rules, which also require pre-screening of subsidies for potential distortions to competition, and there had been significant concerns about the effectiveness of the ex post regulatory regime under the RPT Rules. It was also not reasonably foreseeable, at the time the APT Rules were adopted, that they would create a systemic issue of significant delays to FMV assessments which would impact competition.

The APT Rules could also be distinguished from the UEFA prior authorisation rules found to be unlawful in Superleague, as the latter lacked a timetable or any form of criteria that governed UEFA’s substantive assessment.

ii. Pricing distortions

MCFC argued that subjecting any sponsorship deal to a supposedly objective FMV assessment is inherently distortive of competition, as different sponsors will value sponsorship opportunities differently, based on their particular objectives and strategy. 

Whilst the Panel accepted that there will be a degree of variance in how different sponsors value the same rights, this was not sufficient to render the APT Rules (as originally adopted) a restriction of competition by object. The ability of the FAPL to restate the price of a transaction is an inherent part of the PSR regime, without which it would be ineffective. The APT Rules also provided sufficient flexibility (through the use of various assessment factors) to recognise the subjective nature of the assessment, and struck the right balance between clubs’ interests and those of the FAPL. Accordingly, the rules were very different from the (arbitrary) prior authorisation rules at issue in Superleague.

Nevertheless, the Panel accepted certain other arguments from MCFC regarding amendments introduced in the 2024 version of the APT Rules. In particular, whereas under the 2021 APT Rules the power to re-state a transaction arose only where it was “evidently” in excess of FMV, that qualifier was removed from the 2024 version. And where the FMV assessment under the 2021 APT Rules asked what the rights in question “could” hypothetically be sold for, the 2024 version asked what the rights “would” have been sold for to an unrelated party. Further, the burden of proof was shifted, so that it was for the relevant club to prove that a RPT was at FMV. According to the Panel, these amendments significantly increased the risk of false positives (and, therefore, the likelihood of a distortion of competition) and amounted to a restriction of competition by object.

Separately, the Panel rejected arguments from MCFC that the re-fixing of APTs at FMV amounted to horizontal or collective price-fixing by the FAPL and/or its constituent clubs². Such re-fixing was needed to preserve fair competition between clubs, which the conclusion of agreements at above FMV – without a true competitive process – would jeopardise. Further, the decision to re-fix was sufficiently removed from the FAPL’s clubs, with FMV determined by an independent body and strict confidentiality being observed to prevent the sharing of commercially sensitive data.

iii. Opaque criteria and insufficient rights of review 

MCFC argued that the FMV rules gave too much discretion to the FAPL, failed to set out sufficiently clear and transparent criteria, and lacked an effective right of review as there was no right to a full merits appeal. 

The Panel rejected this argument, noting that – unlike in Superleague – there were clear criteria for the FMV assessment under the APT Rules, as well as a right to challenge decisions, and that there was nothing in the Superleague judgment to suggest that a full merits right of appeal is a necessary precondition to compliance with competition law.

iv. Exclusion of shareholder loans

MCFC argued that the APT Rules were discriminatory on the basis that, whilst they regulated certain non-FMV transactions, they failed to control the granting of loans by shareholders on favourable conditions (even on an interest-free basis). Such loans have been a preferred method of financing for a number of MCFC’s competitors and MCFC argued that they were obviously APTs, such that to exempt them from the APT Rules was discriminatory and distortive.

The Panel agreed, noting that the exclusion of shareholder loans was discriminatory and permitted the PSR to be circumvented. It concluded that “to permit owner funding via shareholder loans that are not at FMV, while subjecting other forms of funding to the FMV test, is a clear distortion of competition between clubs”. The Panel held that this amounted to a restriction of competition by object.

v. Distortion of competition between the FAPL and football clubs

Finally, MCFC argued that the FAPL competes with its constituent clubs in the market for the sale of sponsorship rights, and the APT Rules distort that competition as they do not apply to the FAPL’s sponsorship agreements (with the FAPL also benefitting from visibility of the amounts paid by sponsors for commercial rights).

The Panel concluded that, notwithstanding there being evidence of potential sponsors engaging with both clubs and the FAPL, any competition between the clubs and the FAPL is necessarily limited, given the clubs can veto any FAPL agreement they consider is not in their interests. Further, the FAPL is in a very different situation to its constituent clubs, in that it is not a football club and its success depends on the success of the Premier League as a whole, such that there is no reason for the PSR to apply to it³. Accordingly, the Panel rejected the suggestion that the lack of applicability of the APT Rules to the FAPL itself gave rise to any risk of distortion of competition.

Commentary

Whilst MCFC was keen to claim victory in the proceedings, close scrutiny of the Panel’s ruling reveals that, for the most part, the PSR and APT Rules have been upheld, with the majority of MCFC’s competition-based arguments being given short shrift by the Panel (MCFC’s arguments as to the rules being applied in a procedurally unfair manner were more successful).

Following the ruling, the FAPL announced on 22 November 2024 that the Premier League’s constituent clubs had approved certain changes to the APT Rules to reflect the Panel’s findings. The most significant change is the bringing of shareholder loans within the scope of the regime. Going forward, shareholder loans will need to be notified as APTs and subject to an FMV assessment. Those entered into before the rule changes will either need to be replaced with other forms of financing within 50 days, or submitted as APTs (loans of a certain age will only need to be notified where further drawdowns are made).

FIFA v BZ

The case originated from a challenge brought against several FIFA rules (the Contested Rules) before the Belgian courts by a former professional footballer, on the basis those rules were contrary to EU law. Although not mentioned in the judgment itself, it has been widely reported that the player in question is Lassana Diarra, who amongst other teams played for Chelsea, Arsenal and Real Madrid.

The Contested Rules – which form part of FIFA's Regulations on the Status and Transfer of Players (RSTP) and are enforced by FIFA and its constituent national football associations – addressed the following.

• Joint and several liability for compensation: if a player terminates their employment contract without 'just cause' before the end of its term, both the player and any club wishing to employ them are jointly and severally liable for any compensation due to the former club (as calculated by FIFA’s Dispute Resolution Chamber, pursuant to criteria set out in the RSTP).
• International transfer certificate (ITC): the national association of the player's former club must refuse to issue an ITC (which permits the transfer of a player’s registration to a club in a different league) to the association where the new club is registered if there is an ongoing dispute regarding the termination of the player’s contract. 
• Sporting sanctions: the new club is presumed to have induced the player to breach their contract and (unless it can rebut that presumption) is banned from registering new players, whether nationally or internationally, for the following two transfer windows.

Diarra argued that the Contested Rules hindered his ability to be signed by Belgian club Royal Charleroi following a contractual dispute with his former club, Lokomotiv Moscow. That dispute resulted in Diarra being ordered to pay Lokomotiv over €10m in compensation, a ruling which Diarra (unsuccessfully) appealed. Meanwhile, Royal Charleroi offered to recruit Diarra, on the understanding that he was a free agent and on condition that FIFA confirm that the club would not be jointly liable for the compensation due to Lokomotiv, which had not been paid. FIFA declined to provide such confirmation, no international transfer certificate was issued by the Russian Football Union, and the transfer subsequently broke down.

The CJEU’s judgment

The Belgian Court referred the matter to the CJEU, asking whether the Contested Rules are compatible with EU free movement principles and EU competition law. In line with Advocate General Szpunar’s opinion from earlier this year, on 4 October 2024 the CJEU ruled that the Contested Rules are contrary to both. 

i. Free movement 

The CJEU held that the Contested Rules impeded the free movement of professional footballers who wish to develop their careers by moving to clubs in other Member States, and imposed considerable legal, financial, and sporting risks on players and clubs, thus hindering international transfers. While restrictions on the free movement of professional players could be justified by overriding reasons in the public interest – such as ensuring the regularity of interclub football competitions and maintaining stability in player rosters – the Court found that the Contested Rules went beyond what was necessary to achieve those objectives.

ii. Competition law

The CJEU noted that the RSTP criteria for calculating the compensation owed to a club in the event of an unjustified termination of contract are discretionary and allow compensation to be fixed at an extremely high, deterrent amount. Alongside such compensation, the rules on ITCs and sporting sanctions carry severe consequences for players and clubs respectively, in the form of being deprived of the possibility of playing professional football in another league, and being unable to sign new players for at least a year.

In light of those facts, the CJEU concluded that the Contested Rules together amounted to a “generalised and dramatic” restriction in the cross-border competition in which clubs could otherwise engage by unilaterally recruiting players who are under contract with other clubs or have allegedly terminated their contracts without just cause. Such players will have undergone training at their former clubs, and the possibility of recruiting trained players is an essential parameter of competition in the professional football sector. 

Whilst the CJEU recognised that it may be legitimate for FIFA to introduce rules aimed at preserving the stability of clubs’ player rosters during a given season (to ensure its competitions are based on sporting merit), this did not warrant such a drastic and generalised restriction of competition. The Contested Rules – even if intended to prevent aggressive recruitment practices – amounted to a no-poaching arrangement between clubs, pursuant to which recruitment must be effected through transfers negotiated between selling and buying clubs. 

Accordingly, the CJEU concluded, the Contested Rules had the object of restricting or preventing competition, in breach of Article 101 of the Treaty on the Functioning of the European Union. 

Commentary 

From a purely legal perspective, the judgment in FIFA v BZ largely serves to confirm and apply the principles set out in the CJEU’s judgment in Superleague. However, the willingness of the CJEU in this case to conclude that the Contested Rules had the object of restricting competition may surprise some, and is likely to encourage similar challenges in future. For its part, the European Commission submitted to the CJEU that the Contested Rules did not have the object of restricting competition, but did so “by effect”. Such a conclusion would have made it easier for FIFA to justify the rules by reference to its objective of preventing aggressive player poaching strategies, which could destabilise clubs whose financial resources are relatively limited.

This judgment also has potentially far-reaching implications for the football industry, in the same way the Bosman ruling did in the 1990s. In particular, some clubs may fear the prospect of it leading to a reduction in control over player registrations, which could erode the value of their playing squads – often their most valuable assets.

FIFA and its member associations will therefore likely look to respond quickly, to introduce replacement rules that preserve the fundamental underpinnings of the transfer system whilst respecting the principles of EU economic law. In this regard, it should be noted that the perceived excesses of the sanctions that may be imposed on players and clubs in the event of a disputed contract termination were central to the CJEU’s analysis. In fact, the judgment can be read as suggesting that, were those sanctions to align more closely to the ordinary contractual principles applicable under the law of the relevant Member State, the competition concerns identified by the CJEU would not arise.

The bigger picture

As noted in our previous article, the CJEU’s rulings in the Superleague, ISU and Royal Antwerp cases appear to have fostered (or in some cases, perhaps, have merely foreshadowed) an increased willingness on the part of stakeholders to challenge the compatibility with competition law of sporting regulations and/or decisions. In this regard, it is notable that both rulings discussed in this article relied heavily on the analytical framework and principles set out in those three cases, with MCFC and the FAPL implicitly accepting Superleague as the relevant authority on the issues between them, despite not being binding under English law. 

Nevertheless, competition law scrutiny of sporting regulations continues to be driven by private claimants, rather than the competition authorities. It will, therefore, be interesting to see if the Commission opts to add to FIFA’s challenges by opening a formal investigation in response to the complaint recently filed with it by representatives of Europe’s professional football players and national football leagues. 

Regardless of whether the Commission does, these cases are unlikely to be the final word on the interplay between sports governance and competition law.
 

¹ Namely: European Superleague Company v FIFA and UEFA (Superleague); ISU v Commission (ISU); and Royal Antwerp Football Club v URBSFA (Royal Antwerp), on which see our previous article.

² This is notwithstanding that such re-fixing does not actually result in the amounts paid under the relevant APTs being altered.

³ The Panel left aside the issue of whether there were in fact in APTs between the FAPL and its shareholders that might warrant an FMV assessment.