What effects have FIFA’s Intermediaries Regulations had on player representation and commission levels?

Published 11 October 2016 | Authored by: Zane Shihab, Nick Bitel

The licensing system for football agents was abolished on 1st April 2015 and replaced by the concept of “intermediaries” in accordance with the FIFA Regulations on Working with Intermediaries (the “Regulations”).1

FIFA (rather predictably) hailed the new regime as a “system that is more transparent and simple to administer and implement, resulting, in turn, in better enforcement at national level”.2 However, some (including the Association of Football Agents3 which represents many existing agents in the United Kingdom, the “AFA”), declared that this would “restore the world of agency to the Wild West.4 (For additional views on the Regulations, please also see LawInSport articles here5 and here6).

As the summer transfer window draws to a close the names of so-called “super-agents”, such as Jorge Mendes and Mino Raiola, are in the news almost as much as their superstar footballer clients. Indeed, the celebrity that such agents now experience was summed up in typically self-effacing fashion by Cristiano Ronaldo who described his representative Mendes as the “the Cristiano Ronaldo of football agents”.7

So, how have the intermediaries - from the big fish like Mendes and Raiola, to the more modest agents - been affected by the Regulations a little over a year after they came into force? This article examines and offers comment on the changes to date, looking specifically at:

  • Recap of the Regulations

  • Effects on the market and quality of representation

  • Commission levels

  • Protection of minors

  • Conclusions and recommendations

 

Recap of the Regulations 

Before examining how they have worked in practice, it is expedient to recap the main elements of the Regulations:

  • We have moved away from the concept of an “agent” and now those engaged in providing services to a player or a club to conclude an employment contract between a player or conclude a transfer agreement between two clubs will be termed an “intermediary”.8

    • Unlike under the previous regime, an intermediary may now be both a legal or natural person, such that corporate bodies will fall under the ambit of the Regulations.9 

  • Breaches of the Regulations will be enforced by the national association and any sanctions imposed may be extended by the FIFA Disciplinary Committee. 10 

  • Intermediaries are no longer required to pass an exam before a national governing body (such as the Football Association, the “FA”) register them. Instead, they will merely have to certify that they do not have “a potential conflict of interest” and that they possess an “impeccable reputation”.11

  • FIFA advised players and clubs to adopt the following “benchmarks”: 

    • The total remuneration per transaction due to intermediaries on the player’s behalf should not exceed 3% of the player’s basic gross income for the duration of the relevant employment contract; 

    • The total remuneration per transaction due to intermediaries who have been engaged by a club in order to conclude an employment contract with a player should not exceed 3% of the player’s eventual gross income for the duration of the relevant employment contract; or 

    • The total remuneration per transaction due to intermediaries who have been engaged by a club in order to conclude a transfer agreement should not exceed 3% of the eventual transfer fee paid in connection with the relevant transfer of the player.12

  • There is now a prohibition on players and clubs from paying an intermediary when negotiating an employment contract and/or a transfer agreement if the player concerned is a minor (i.e. under eighteen years of age).13

The latter three measures caused the most consternation in the much-maligned agent community. But have these fears been realised?

(Note: for a detailed explanation of The FA’s Regulations on Working with Intermediaries, please see here14).

 

Effects on the market and quality of representation

It was felt by many existing licensed agents that the elimination of the exam requirement would flood the market with unqualified persons15 which would, in turn, mean that players and, to a lesser extent, clubs (who may be better informed) would not receive the skilled service that only agents with the relevant expertise could provide.

FIFA countered that the regulation of access to the activity of agency (by imposing barriers to entry, such as the exam) did not work as those providing agency services could simply elect not to register and it is impossible to enforce regulations against unlicensed agents. This assertion was supported by the alarming statistic that “only 25 to 30 per cent of all international transfers are conducted via licensed agents”.16

Instead, FIFA would look to

provide an overarching framework for a better control of the activity itself by introducing minimum standards and requirements as well as a registration system for intermediaries who represent players and/or clubs in the conclusion of employment contracts and transfer agreements”.17

In the authors’ experience, FA regulated agents found it unfair that they were subject to The FA’s rigorous regime, whereas those outside the ambit of the FA were effectively unregulated. The problem that FIFA has is that it represents 211 Member Associations18 and the enforcement of the old agent rules differed dramatically across such Associations depending on factors such as authority, integrity, resource and capability. This meant that the less developed Associations were incapable of employing the old agents’ regulations to sanction those using unlicensed agents, in addition to regulating the activities of the licensed agents. In reality, therefore, FIFA’s decision was made on the basis that a “one-glove-fits-all” approach does not work.

However, elements of the old regime certainly seemed to have some positive effect. The difficult examination process, introduced by FIFA to ensurethe appropriate training and standard of players’ agents”,19 did act as an effective barrier to entry. The authors are aware of numerous individuals who tried and failed to pass the test, and there is little doubt in the authors’ mind that dropping the examination has resulted in a number of under-qualified individuals, in search of a quick buck, registering themselves as intermediaries to the detriment of those that FIFA has sought to protect, namely the players and the clubs.

FIFA has tried to counteract this by ensuring that an applicant must make the following affirmation: “I declare that I have an impeccable reputation and in particular confirm that no criminal sentence has ever been imposed upon me for a financial or violent crime”.20 The authors are sure that countless managers at every level of the footballing world may think that certain agents would have difficulty in demonstrating the “impeccable reputation” assertion. In fact, they do not even need to do so; this is in fact self-certification and hardly provides any obstacle to unscrupulous individuals who will simply tick the box.

In addition, the enforcement argument advanced by FIFA does not, to the authors’ mind, carry a great deal of weight. Each Member Association is still responsible for imposing the Regulations by ensuring that they implement a registration system for intermediaries.21 Therefore, if a registration system is not implemented and effectively enforced by an Association we will still have the issue of unregistered agents operating in the market.

 

Commission levels 

In the authors’ experience, prior to the introduction of the Regulations it was common to see agents receiving 10% to 15% (and sometime as much as 20%) of the total value of transfer fee or the player’s contract, depending upon whom the agent was representing.

Indeed, Paul Pogba has recently completed his return to Manchester United from Juventus for an eye-watering world-record transfer fee in excess of one-hundred million pounds According to reports Raiola has pocketed approximately twenty million pounds from this deal (equating to 20% of the transfer fee).22

So why then have we seen the commission for the smaller agencies drop to around 5% since the Regulations came into force? In the authors’ opinion, this is due to a number of factors:

  • Firstly, with more agents operating (because of the relative ease in which one can now become an intermediary), competition has intensified and the agents have been forced to lower their commission in order to become more competitive in response to the increased choice of clubs and players. 

  • Secondly, the Regulations have given players an indication of what (FIFA believe, at least) an agent’s services are worth. Thus, the players are now better informed and they do not now have to rely solely on the word of the agents (and this information flow is assisted by the FA and Premier League’s helpline for players).23

  • Lastly, these agencies often represent the less in-demand players and there is little doubt that clubs have used FIFA’s benchmarking recommendation as an authority to squeeze these agents and drive commission levels lower.

These same market forces have considerably less effect on the aforementioned super-agents who can effectively name their price because they know that the elite clubs such as Real Madrid, Barcelona and Manchester United, have the desire to sign the world’s most prized assets and, more importantly, the resources to pay the transfer and agent fees.

 

Protection of minors

The well-intentioned rationale behind FIFA’s prohibition of intermediaries earning commission from deals involving players under the age of 18 is clear: it wished to prevent the exploitation of vulnerable minors by dishonest agents. However, in the authors’ opinion, the Regulations do not deal sufficiently with this real problem.

To begin with, there are no provisions in the Regulations (although there may be restrictions in law) that limit the length of representation contract between an agent and a player. This anomaly allows agents to, for example, sign a 15-year-old child on a long-term contract to ensure that they have the player tied down after their eighteenth birthday, at which time the agent can receive remuneration from the player. Clearly, any such long-term contract would be open to a restraint of trade challenge by the player in the courts, such as was the case concerning an eight year representation agreement signed by Wayne Rooney.24 However, it is a substantial failing for FIFA not to have not added the extra regulatory protection of a constraint on the maximum contract duration in the Regulations.

Thankfully, the FA has addressed this issue in its own Regulations on Working with Intermediaries25 and imposed the following additional safeguards:

  • The length of the representation contract between player and intermediary cannot exceed two years;26 

  • An intermediary must not enter into any agreement with a Player before 1st January of the year of the player’s sixteenth birthday;27 and 

  • If an Intermediary wishes to represent a player who is under 18, or to represent a club in respect of a minor, they must obtain a specific authorisation from The FA to do so.28

Furthermore, the (FIFA) Regulations state that

Players and/or clubs that engage the services of an intermediary when negotiating an employment contract and/or a transfer agreement are prohibited from making any payments to such intermediary if the player concerned is a minor”.29

Strict interpretation dictates that this can be read to imply that, as soon as the player turns eighteen, the agent can be paid for those intermediary services carried out when the player was still a minor. In practice, we are aware that this has resulted in agents signing a minor to a contract that contains provisions that allow them to receive commission for such services after the player turns 18 (thus defeating the intention of Article 7.8 of the Regulations).

In any event, we fear that clubs desperate to sign the latest young star will all too easily circumvent the prohibition. In the past, clubs have paid agents for services seemingly unrelated to a transfer (e.g. scouting services) to get around regulations and the authors are sure that a determined club will find similar ways to reward agents.

 

Conclusion and recommendations 

To date, there has not been any published FA decisions concerning the Regulations and only until a significant body of disciplinary case law has been developed will it be possible to accurately determine how the Regulations can be improved and adapted.

Nevertheless, in the authors’ opinion, the Regulations (and in particular the removal of the examination requirement) have made it considerably easier for an individual to register as an intermediary to the detriment of the service standard offered to players and clubs.

To ameliorate this, our recommendation would be that a hybrid-process is adopted: one which reinstates the examination process (thus ensuring that a minimum level of knowledge is required to operate) whilst also ensuring that those who pass the exam register with the relevant Association on every occasion that they are involved in a specific transaction (as they are currently required to do under the Regulations). 

With respect to the benchmarking, the artificial and arbitrary recommendations has meant that, in the world of the intermediaries, the rich will get richer and the poor poorer. We expect this trend will continue until many of the agents are dis-incentivised enough to leave the trade or more of the smaller agencies either go out of business or are swallowed up by the larger organisations.

The authors are not aware of the basis on which FIFA set the recommended commission at 3%. It seems an extremely low, especially considering that, prior to the implementation of the Regulations, FIFA claimed that the average commission paid by clubs to agents for international transfers was 28% of the value of the transaction.30 Such a low benchmark is perhaps more of a political statement by FIFA: the embodiment of the widely-held belief that agents do not earn their money but instead leech off the sport and provide no discernible value. The truth is that, whilst every industry will attract some chancers, many of the agents are regularly involved in complex negotiations (requiring both legal and commercial expertise, experience and a detailed knowledge of the market) that may last weeks, sometimes months. In other words, if the agents’ services are worth 3% then why did the market dictate that they should receive a commission of nearly ten times that level (as FIFA has acknowledged)?

FIFA will clearly argue that the benchmarking is just a recommendation and that such suggestion is a proportionate way of ensuring that players are protected from unscrupulous agents and that the money remains within the game for the good of football as a whole. However, if FIFA had set a more realistic benchmark (closer to the level that the free market previously dictated) then perhaps the Regulations would not be the subject of a complaint to the European Commission by the AFA31 on the basis that FIFA is contravening Articles 101 and 102 of the Treaty on the Functioning of the European Union.32 This appeal concerns the distortion of competition and abuse of FIFA’s dominant position and we await the outcome with interest.

The sections of the Regulations that deal with minors fall-short of their intended aim as it is too easy to draft a representation contract to circumvent the payment restrictions. Another real issue is that we live in a world where players often sign multi-million pound contracts whilst still minors (for example, prodigy Martin Ødegaard had only just turned 16 when he signed a contract for a reported £80,000 per week with Real Madrid in 2015).33 These contract negotiations are often complex and if the player requires the expert services of an intermediary, why should said intermediary not be paid for these services?

Overall, there is certainly work for FIFA to do, not least to deal with the ease in which clubs can profess to remunerate agents for ancillary services that sit outside of the Regulations when they are in fact paying for intermediary services that should fall under the ambit of the Regulations (see scouting example above). These loopholes should be expressly prohibited; regrettably, lighter-touch regulation is not going to improve this situation.

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About the Author

Zane Shihab

Zane Shihab

Zane is an Associate Partner in the Sports Department and provides commercial advice to global brands, international sporting bodies and events and high-profile individuals.

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Nick Bitel

Nick Bitel

Nick Bitel has spent over 35 years working in the sports sector acting as a lawyer, administrator and chief executive. 

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