An overview of the restructure of Argentine football following years of uncertainty

Published 19 April 2017 By: Ariel Reck

Argentina flag on football inside of stadium

Over the past two years, the Argentine Football Association (AFA) has experienced arguably the most critical time of its centennial existence, weathering a “perfect storm” on several fronts. For international observers, the visible results were a period of more than 90 days without official football at domestic level[1] (that finally ended on the 6th March 2017) and FIFA’s intervention in the AFA, which ended with the election of the new president on March 29, 2017.

This article explains the critical issues at play during this period of instability, which included political, economic and legal factors. Specifically, this article reviews:

  • The end of the “Grondona” era – a change of presidency of the AFA and FIFA’s intervention;

  • The end of the “football for everyone” era and the creation of a professional league – the role of domestic broadcasting rights;

  • The new political landscape – working towards a brighter future for Argentine football.

 

The end of the “Grondona” era

Julio Grondona was president of the AFA for 35 consecutive years (from 1975 to his death on 30 July 2014). His unexpected passing was followed almost immediately by “FIFA-gate” - the investigations into corruption started by the US government that ended with almost every president of the national associations that form the South American Football Confederation (Conmebol) being prosecuted and incarcerated[2]. Three of the main marketing officers that were imprisoned were from Argentina.

Since no “natural” successor (in political terms) emerged, the vice president of the AFA, Luis Segura, was elected as president for the remainder of the term. Then, in December 2015, a new election took place. This is where difficulties began. The AFA was literally divided in two halves. On one side, “the big clubs” (meaning most the 30 first division clubs); and on the other, the majority of the clubs from the lower leagues.  Many factors caused the split, but the most important one was the balance of power within the AFA between the small and big clubs. The AFA’s voting system operates on a one-vote-per-club basis for first division clubs (of which there are 30) and then a smaller number for the lower categories, in a decreasing percentage. But the result is that the lower division clubs, if united, still have a majority over the bigger clubs.

The result of the election was a 38-38 tie, the problem was that only 75 clubs voted. Two votes were put together in one envelope and nobody noticed until the final count. Allegedly, it was a mistake. Further negotiations were held to have either a new election or a government of consensus, but no solution was achieved between the two groups. Finally, the Bureau of the FIFA Council decided on 24 June 2016 to appoint a “normalization committee” for the AFA in accordance with Article 8 Paragraph 2 of the FIFA Statutes.

Originally designed as a 7-member board, it was finally formed with 4 members, with the president Mr. Armando Pérez (president of Belgrano de Córdoba, a first division club) having a qualified vote.

The Committee replaced the AFA’s Executive Committee and oversaw the administration of its affairs for a period of 6 - 12 months, until the approval of the new Statutes, in line with the FIFA regulations, and the election of the new president. Many clubs questioned the Committee for taking decisions that arguably went beyond its scope (e.g. the dismissal of employees and the approval of long term contracts)[3].

 

The end of the “football for everyone” era and the creation of a professional league

In mid-2009, Argentine clubs were facing huge debts to players and a strike was threatened by the player´s Union.

The AFA demanded a raise in the annual payment from TSC, the company (owned by the media group Clarin) that held the TV rights of the national championship. But the company refused, offering only a small amount as an advance payment for further years of the license. The AFA therefore decided to terminate the agreement with TSC, alleging material breaches of the contract.[4] At the same time, Grondona and the former Argentinian president, Cristina Fernández de Kirchner, agreed on a new deal between the AFA and the State know as “Fútbol para todos” or “football for everyone”.[5] 

The agreement with the State was signed for 10 years and granted the AFA a minimum fixed fee that was twice as much as under the deal with TSC[6]. According to the contract, the State would show every game on free-to-air TV. In theory, profit was going to be obtained from publicity, sub-licensing agreements and the international sale of rights. In practice, however, almost no commercial advertising was shown during the matches, and instead the government used it as a vehicle for political propaganda. The TV rights were also not sub-licensed, but instead were given away for free to TV channels whose only obligation was to maintain the original audio and government propaganda.

At the same time, TSC sued the AFA for an undetermined amount in damages for wrongful termination of their contact. However, the case was “frozen” for years, as TSC knew their high demands were unlikely to be awarded in court; while the AFA knew their breach was unjustified but remained unwilling to pay “reasonable” compensation. As a result, neither party really wanted to progress the case. For reasons explained below, this in fact ended up having a big impact on the selection of the new TV rights licensee.

Because of the inflation that has affected the Argentine economy, the value of the monies received by AFA from the State fell significantly in real terms. The agreement contained an an indexation clause, but the author understands that it was never used and that in practice every raise in the yearly license price was negotiated between AFA and the government.

Due to the political use of the agreement, many people started to perceive it as a form of State aid to football instead of a commercial arrangement (which is not unlawful in Argentina, but does raise ethical questions). The “Football for everyone” program stated to gain critics, who believed the State money could be better spent elsewhere[7]. Nevertheless, many others were still happy with the possibility of watching every single football game on free-to-air TV (and in HD); and during the political campaign in 2015, every candidate stated that the program would be maintained. 

When current president, Macri, won the election, he tried to reduce State expenditure on the program (i.e. fees and production costs). He limited it to the first division games, ended the political propaganda during matches and started to sell commercial advertising, and sub-license the games on a commercial basis to private channels. However, the measures provided only a partial solution, as the State could still not break-even even under the arrangement and the AFA was demanding a new raise of the fixed payment[8].

To compound matters, a criminal investigation was started for the alleged misuse of these funds by the clubs and club directors. Since the amounts received were from State funds, the misapplication of them constitutes a serious crime that carries heavy penalties (including prision time). Judicial observers were appointed and the AFA was on the verge of an intervention. In June 2016, various officers in charge of the program (from the State, including former chief cabinet Anibal Fernández, and also from AFA, including former president Segura) were formally prosecuted[9]

Within this context, the “big clubs” decided to create a separate professional league to explore the possibility of selling the TV rights of their games to private companies[10]. The idea faced two significant legal hurdles: first, the rights to their games belonged to the AFA under the terms of its Statues; and, secondly, the 10-year contract with the State was still valid and binding. As with the origin of the English Premier League, the big clubs threatened to breakaway.

Meanwhile, the Government continued to cut funds from the program. This shortage of money created by the Government to pressure the clubs[11] backfired as it led to the player´s strike in February 2017, when the government wanted the football season to start. Finally, the contract was terminated and it was agreed that the State pay the AFA a relatively small sum by way of compensation. The players also received their overdue salaries and the strike ended. 

This unlocked the way for a professional league formed of the big clubs, and the concept was finally approved under the jurisdiction of AFA. Under the terms of the new deal, the TV rights still belong to AFA, and the new league (which will start in 2018) will only manage the first division rights while guaranteeing a minimum fixed income to the lower division clubs.[12]

The AFA also took back control of its TV rights and decided to sell them to private companies. Three offers were presented and a conglomerate led by Fox-Turner was finally selected[13]. What tipped the scales in favour of their offer (similar in monetary terms to the other two candidates) is that it included the settlement of the TSC case, as TSC is part of the Fox Turner conglomerate.

 

The new political scenario

When FIFA appointed a normalization committee for the AFA, many clubs claimed that the selection of its members was influenced by the State, which constituted a virtual intervention by the State that was tacitly consented to by FIFA and Conmebol. 

The main task of the Committee was to reform the AFA’s Statutes to bring them into line with FIFA standard statutes (including implementing a smaller executive board, inclusion of seats for other stakeholders including women’s football and beach football (among others)), and to call fresh presidential elections. However, in practice, the committee also became involved in other tasks, including internal reforms, and the appointment of the head coach of the national team.

When drafting the new statutes (which was undertaken with the assistance of FIFA) the main issue was the relative representation afforded to the two different “groups” of football clubs - i.e. the bigger first division clubs (politically backed by the government[14]), and the smaller, lower division clubs. This was the key issue, as it would also likely determine who would become the new president of the AFA.

The former Statutes were designed to give the president full control, with the power to appoint every officer and director. In terms of representation, the small clubs outnumbered the big clubs, so acted as a “shield” against the power of the big clubs. With this structure the president was able to govern even against the will of the big clubs.

Under the new statutes[15], the power of the lower division clubs has been reduced, but not as much as wanted by the bigger clubs and the government (note: the government generally feels closer to the bigger clubs in political and ideological terms, hence the reason it “backs” them).

Then, the composition of the two rival groups shifted from the original big clubs vs. small clubs. Boca Juniors, Independiente, Racing and a few other “big” first division clubs joined the group of smaller clubs and backed Claudio Tapia for AFA presidency (again, for political reasons). Tapia is the president of Barracas Central, a third-tier club from Buenos Aires. The other side did not present any candidate to the elections that were held on March 29, 2017.

Right before the election, a final dispute arose in relation to the integrity checks. Since the ethics commission hasn’t yet been created at a national level, FIFA wanted the control checks to be carried out by Conmebol. However, due to a political dispute between Conmebol, and Boca Junior´s president and the candidate to the AFA´s vice-presidency, the AFA tried to appoint another body as the integrity arbiter. FIFA rejected this, and warned the AFA that it risked being suspended from the federation[16].  Thus, the candidates conceded, and accepted Conmebol as integrity controller. Only a few hours before the election, the positive result of the integrity tests were communicated to the AFA, and Tapia was elected with 40 positive votes and 3 abstentions.

 

Comment 

The most difficult time in the history of AFA seems to be over now: 

  • The AFA has finally been “normalized” after years of uncertainty, with a newly elected president and statutes passed in conformity with FIFA’s Regulations.

  • A new TV rights deal has been agreed, which includes significant increases in the yearly fee, and has simultaneously facilitated the settlement of the legal claim from the former licensee.

In terms of the work still to be done:

  • It is still to be seen how the new professional league will be set in motion and evolve.

  • Also importantly, new control mechanism shall be put in place, including a licensing system to control club`s spending and debts.

At many levels, it is almost like Argentine football is starting with a blank page. But a new beginning demands that previous mistakes are learned from to avoid similar ones from happening in the future.

 

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Author

Ariel Reck

Ariel Reck

Ariel is a lawyer in Argentina focused exclusively on the sports sector, mainly the football industry. He has particular experience advising on third party player ownership issues, player´s transfers and international sports disputes before FIFA and CAS. He has also spoken at conferences on these issues in Argentina and at international level.

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