Re-regulating football agents: would FIFA’s proposed commission cap and prohibition on dual representation work in practice?

Published 06 June 2019 By: Serhat Yilmaz

Football Agent

In April 2018, FIFA decided to re-reform its agents’ regulations.1 The move comes just 3 years after the adoption of its current framework - the Regulations on Working with Intermediaries (RWI). The RWI was introduced with an aim to address the problems surrounding unlicensed agents, who were reportedly involved in an estimated 70-75% of international transfers in football2 and it did this by replacing the licensing-based system with the concept of intermediaries shifting regulatory efforts to the supervision of transactions (transfers) instead of individuals. National federations were left to regulate intermediaries to the extent they saw fit. However, FIFA now acknowledges that the RWI has largely failed to fulfil the intended objectives and the FIFA Task Force Transfer System, established by the FIFA Football Stakeholders Committee, commenced the ongoing reform process.3

One of the main objectives of this round of the regulatory reforms appear to be to restrict the level of earning by agents in the transfer market in order to keep money in the game. FIFA President, Gianni Infantino, who has initiated the reform process, seems to be particularly concerned about "the huge amount of money flowing out of the football industry" due to payments to agents and requires the issue to be addressed.4 The other football stakeholders including UEFA, the European Club Association (ECA), FIFPro, and the European Leagues feel that agents are "disproportionately well-remunerated for their services".5 Claiming that agents are "sucking tons of money" out of the game, some English Premier League clubs’ executives have also called for a ban on clubs paying agents to tackle ever increasing commissions.6 Finally, the main argument put forward by FIFA revolves around aligning agent fees with solidarity and training compensation payments in football for the general benefit of the game, as at present agent fees outstrip both.7

In order to achive the envisaged regulatory objective outlined above, there are currently two proposed restrictive measures under consideration by the FIFA Task Force Transfer System:

  1. the prohibition of dual representation; and

  2. the cap on commission.8

By way of synopsis, in the author’s view these measures are ostensibly anti-competitive and would likely be challenged under competition laws.9 The potential commission cap clearly aims to fix the commission level payable to agents in the transfer market. While the ban on dual representation relates to the conflict of interest when representing both player and club in the same deal,10 it too has economic ramifications as double or in some cases triple payments to agents in practice would be eliminated. In strict legal terms, in order for these measures to survive a legal challenge, they need to be justified by clearly stating their legitimate objectives and also showing their necessity and proportionality in achieving those objectives.11

This article examines these two restrictive measures with a view to critically assessing whether or not they would actually achieve their legitimate objective in practice – i.e. limiting the earnings of agents to keep money in the game for its general benefit. Assessing whether the two measures work in practice is, in the author’s view, an important consideration when analysing the necessity and proportionality aspects in a potential legal challenge.

Dual representation – would a ban limit agents’ earning and help keep money in the game?

FIFA TMS data does not immediately reveal a significant problem with dual representation in the transfer market

The act of dual representation refers to agents working on behalf of both a player and a club, either the engaging or releasing club, in a same deal. Multiple respresentation is also seen in practice where an agent represents all three parties of a same transaction. One of the most high profile multiple representation cases was the transfer of Paul Pogba from Juventus to Manchester United during which the player and both clubs were represented by Mino Raiola.12

The first point that the author considered was the evidence on the extent of dual representation in football, in order to put the practice into context. How frequently does it actually occur?

Presently, FIFA uses the data from the Transfer Matching System (TMS) to evidence the prevelance of the duality and multiple representation in the transfer market. However, a closer analysis of the FIFA TMS reports reveals that a significant level of the practice is not evident in the vast majority of international transfers. According to the most recent report of the FIFA TMS13, during six years from January 2013 to December 2018:

  • There were a total 86,212 international transfers;

  • Only 16,825 (19.5%) of those transfers involved at least one agent;

  • Of those transfers:

    • 9,757 (11.3%) involved agents that exclusively represented the player;

    • 3,345 (3.8%) involved agents that exclusively represented the engaging club;

    • 625 (0.73%) involved agents that exclusively represented the releasing club; and

    • 3028 (3.5%) of transfers involved dual or multiple representation.

  • Of those 3028 transfers involving dual or multiple representation:

    • 2,234 involved agents representing both the player and the engaging club;

    • 377 involved agents representing the player and the releasing club;

    • 251 involved agents represented both the releasing and the engaging club;

    • 236 involved agents represented the player, releasing and engaging club.

As is apparent, the TMS evidence hardly supports the claims about the prevalence of dual and multiple representation in the transfer market.

There appears to be little hard data on the link between duel representation and increased agents’ fees

The FIFA TMS data indicates the limited extent of dual and multiple representation in the market. Now we have this figure, the next question to address is: does dual representation actually facilitate higher payments to agents, as claimed by both FIFA and some of the English Premier League clubs14?

Unfortunately, the TMS data does not reveal this, and there is no hard data currently available to satisfactorily answer the question. What needs to be gathered by the governing bodies is the breakdown of individual commission payments made by clubs and players to agents in dual representation transfers15 so that it can be compared to cases of single representation. In this respect, it is important to note that in cases of dual representation it is common for club and player to agree a 50-50 split on the agent’s commission.16 However, in certain cases where the club is particularly keen to sign the player, an agreement might be in place for a larger portion of fees to be paid by the club. Even in these circumstances though, it is still necessary to establish that clubs in general pay an increased aggregate level of commission, as opposed to just a higher proportion of the due commission, because of the element of dual representation.

Therefore, in the author’s view, a more convincing economic data, and data analysis, is needed to justify the restriction on dual representation.

The effect of the probation of dual representation on the earnings of agents could be trivial and the ban may lead to a more inflated transfer market

Even if data were to reveal that dual representation led to significantly higher payments for agent’s, the next question to consider is whether or not prohibiting dual representation would in fact reduce the level of fees and help to keep money in the game (as envisaged by the certain clubs and FIFA).

In the author’s view, the economic effect of banning dual representation might be trivial for two main reasons.

  • First, an agent’s commission is directly linked to either the player’s gross basic salary (in the case of the representation of players) or the transfer fee (in the case of the representation of clubs). Both player salaries and transfer fees have significantly increased over recent years,17 and this trend is a key market driving force behind the increasing level of commissions paid to agents in football. This is an obvious fact yet generally ignored, or not mentioned, by the proponents of the ban of dual representation. Therefore, unless clubs’ spending on transfers and players’ earning are somehow reduced/restricted18, the ban on dual representation might not be enough as a measure alone to achieve the intended reduction in agents’ earnings.

  • Secondly, and perhaps more importantly, if a club really wants to secure the signature of a player, then it is very likely to explore potential ways to pay the agent’s fees notwithsnading the ban. Again this reflects a market reality. For example, the player’s salary or loyalty/signing-on fees could always be increased to incorporate the agent fees into the financial dimension of the deal. For this reason, a prohibition on dual representation may actually produce an adverse affect by leading to more inflated transfer market in football.

Commission cap – would a hard cap limit agents’ earning and help keep money in the game?

Having analysed the proposed ban on dual representation, we now turn to the commission cap and ask the same question: would it work in practice to limit agents’ earnings and help keep money in the game?

The currently recommended “soft cap” of 3% under the FIFA RWI has failed to limit agents’ earnings as it has been hardly followed in practice. The proposed measure under the new regulatory framework seems to be a hard cap imposing a fixed limit on agents’ commissions that is to be mandatorily implemented and enforced by national associations. However, the precise capping model (i.e. whether it is exclusively linked to the player’s salary or the total value of the individual transaction, and the level of cap, whether being 3%, 5%, 10%, etc) have not yet been finalised and agreed.

The proposed cap is likely to drive smaller agents out of business and may lead to an oligopoly in the agent market

In the author’s view, a commission cap first of all would be likely to distort competition in the agent market by driving smaller agents (generally operating within lower divisions of organised football) out of business.

The latest FIFA TMS data 2013 – 2018 suggests that:

  • The normal level of earnings by agents for representing clubs falls between 10,000 - 100,000 USD per transfer.19

  • However, more fundamentally, just 6.3% of transfers (475 transfers) accounted for 54.9% of the total commission paid by clubs to agents came (OR, put the other way, 93.7% of transfers (7,080) accounted for just 45.1% of all commissions).20

So, in reality, although UEFA reports a vibrant and competitive agent market in European football,21 the FIFA data reveals a concentration of high level commissions paid to a relatively small cohort of agents in a small percentage of international transfers22. Those agents who can command transactions with high transfer fees and salaries for players are likely to be less affected by any commission cap, whereas agents with small earnings are more likely to struggle and suffer.

The former chairman of the Association of Football Agents (AFA) in England underlines this potential detrimental effect of the 3% commission cap guide and claims that it would destroy the business of probably 50% of their members.23 Thus there is a real risk that a commission cap leads to an oligopoly in the agent market where a small number of powerful agents may end up controlling the sector. The concentrated agent market may not work well for the purposes of limiting the earnings of those powerful agents who could dictate their financial terms on clubs and players beyond the level of commissions. Potential commercial arrangements, whether being a scouting or an endorsement contract, could become a norm in practice in order for clubs or players to meet the financial terms demanded by those agents controlling the market.24

A gradual capping model could be potentially a less restrictive measure to adopt to protect competition in the agent market and limit the level of commission especially in the high value deals

In the author’s view, a potential less restrictive measure could be a gradual capping model, which would link the level of commission to the financial dimension of transactions, either based on the gross annual salary of the player in the case of player representation or the transfer fee in the case of club representation. Transfers with a low financial value below a certain threshold could be subjected to a higher level of commission whilst the commission level can be gradually reduced as the economic value of the transaction increases.

The data suggests that this type of gradual model seems to exist in practice anyway. According to the FIFA TMS Report, the average commission as a percentage of transfer fee for agents representing engaging clubs tends to be lower when transfers fees are high.

  • The median commission is 16.6% in transactions with transfer fees less than 1 million USD. The median commission reduces to 8.8% in transactions with transfer fees between 1 million and 5 million USD.

  • The median commission further decreases to 5.3% in transactions involving transfer fees greater than 5 million USD.25

The similar trend is also evident within the UEFA Report which analyses 2,000 transfers in European football between 2014 and 2017. The report illustrates that "in general, agents" commissions are higher on smaller deals-averaging less than 10% on the deals of more than 5 million Euro but 20% on transfers of less than 1 million Euro’.26 The gradual capping model therefore could certainly be a mechanism to allow smaller agents to survive in the market and curb some of the astronomical commissions paid in the high value transactions which are seemed to inflate the aggregated level of commissions in the agent market as indicated by the FIFA TMS Report and the UEFA Report,

Conclusion

To conclude, this piece has sought to examine the potential practical effects of the two restrictive measures that are currently deliberated by the FIFA Task Force Transfer System in the reform process of the current agents regulations. From a legal perspective, these types of analyses would be important in establishing the necessity and proportionality of the measures in achieving their legitimate objective. By taking into account available data on the transfer market and agents, it can be seen that both proposed measures may actually fail to achieve the intended objective in practice and also lead to adverse effects in both the transfer and agent markets. Therefore, the governing bodies and relevant stakeholders in football should carefully, and objectively, assess these proposed measures prior to incorporating them into the new regulations.

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Author

Serhat Yilmaz

Serhat Yilmaz

Lecturer in Sports Law, Loughborough University

Serhat Yilmaz is a Lecturer in Sports Law in the School of Sport, Exercise and Health Sciences (SSEHS) in Loughborough University. He holds a PhD in Law from University of Westminster, where he completed his thesis titled “The European Union and Players’ Agents: a theoretical analysis of the EU’s intervention into the regulation of players’ agents in Europe”. Serhat is also an associate lecturer at the Birkbeck Sport Business Centre at Birkbeck College (University of London) and the academic member of the Centre for Society, Law and Popular Culture at the Westminster Law School (University of Westminster)

Serhat’s research expertise is around the regulation of intermediaries/agents and the protection of minors in sport, in particular in football. He has also developed and run, as a programme director, the Professional Certificate Programme for Sports Agents at Loughborough University.

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