The Fifpro report on ending transfer fees – a review

Having recently begun legal action at European level to challenge the system of football transfer fees, Fifpro, the global body representing professional footballers, has released its full analysis to support its claim that the ‘abusive transfer system is failing’ and should be scrapped.

I had a read of the report to see if it really substantiates those claims and to get an idea what football would look like if they were abolished…

In its summary of the findings, Fifpro leads with the claims that:

“The 3 billion Euro a year football player transfer system which is intended to redistribute wealth among clubs is failing all but a few elite teams… The research by Stefan Szymanski… found that “a significant fraction of the transfer market is controlled by elite clubs who circulate top players among themselves.” Very little trickles down to “grass roots’’ football.”

All of which sounds plausible and suggests an inclusive and welcome desire for broad reform of the sport in the interests of all stakeholders.

The summary goes on:

“The transfer rules tend to restrain competition between clubs rather than promote it, do little to support competitive balance, solidarity or club stability,” Szymanski said. Transfer fees would be much lower and fairer if they were based exclusively on the costs to clubs of training a player, and the system would be more competitive, he said.

And here’s where things get really interesting. Is Fifpro claiming an interest in competitive balance and lower, fairer transfer fees? Read the summary and it appears that just about the only thing this document doesn’t claim for the end of the current system is that it will help England win the World Cup.

Can this really be? A labour organisation, whose sole purpose it is to improve pay and conditions for its members (aims I wholeheartedly support as a strong believer in unions), setting out to rebalance the game, with fairness at its heart?

Inside the report – Fifpro’s real motives

I had a read of the report to find out if this was true. And, to no great surprise, I found precious few mentions of hard-pressed fans, withering grassroots or struggling smaller teams.

The really telling section is part three, which looks at the effect of the current system on players. I’ve highlighted a few lines that might suggest the true motives behind Fifpro’s actions.

3. The Economic impact on players of restraints in the player market

Transfer fees

“The incidence of the tax falls almost entirely on the player, given that the player would otherwise be paid a higher wage.”

The Protected Period

“This significantly constrains the player’s ability to realize his earnings potential and limits freedom of movement.”

Transfers outside the Protected Period

“Outside of the protected the player is still required to pay compensation for unilateral breach without just cause or sporting just cause…”

The Transfer window

“Any restriction of the period during which players are allowed to move between clubs limits the economic opportunities of the players and limits their freedom of movement.”

This restricts potential bidders for the services of players, limiting their freedom of movement, reduces employment opportunities, and pushes down the wage that a potential employer might be willing to pay, given the restriction on potential alternatives.

Could it be that, actually, Fifpro isn’t as concerned as the press release would have you believe about the general health of the game?

Player contracts – how restrictive are they?

The analysis of the position of players is also quite eyebrow raising:

“The employment relationship in football, as in many other businesses, is asymmetric in that the club is more powerful and has more resources than the player. These examples show how the club can exert pressure on the player in order to achieve its own ends while the player has few options when the club fails to respect the contract.”

This paragraph followed some data on the disgraceful bullying and mistreatment some players face. Clearly this is unacceptable, but it’s unclear why this issue couldn’t be addressed more rapidly and effectively by means other than a protracted legal battle in Europe over transfer regulations. Likewise delays in wage payments to players are unjustifiable, but are they caused by an inherent flaw in the transfer system?

After this, we have details of a two players who suffered supposedly unfair treatment when they walked out on their club despite being under contract (and, I assume, while that contract was being paid in full).

The financial penalties they faced might seem harsh to some, but there’s no indication of how isolated these cases are. Nor are they matched with reports of players forcing through moves to big clubs – a situation for which every football fan will be able to supply countless examples from their own club’s history alone.

The argument, in effect, is that players should be allowed to exit a contract at any point and that the penalties for doing so to the player should be vastly smaller than they currently are.

Transfer fees as a tool of redistribution – and what if they don’t work?

Next, there’s an analysis of the redistributive impact of transfer fees, which argues, essentially, that since they aren’t very effective in this respect, then this is another reason to scrap them.

I’m not sure this follows, however. That the current system isn’t delivering competitive balance on its own, isn’t an argument that it is counterproductive nor is it an argument that scrapping it wouldn’t make things worse.

The report goes on:

“… Deloitte in the 2014 Annual Review of Football Finance (Databook p11) traced the flow of transfers in English football for the season 2012/13 within and between the four divisions. 72% of transfer payments by Premier League clubs to other English clubs stayed in the Premier League. Net payments of transfer fees to teams in the Championship were £32 million, about half the amount of money paid in solidarity payments by the Premier League. Below the Championship the amounts paid were even smaller- £7 million to the third tier and £1 million to the fourth. If no transfer fees were paid the lower tier clubs could be compensated by modest solidarity payments equal to less than one half of one percent of Premier League revenues.”

If this is correct – that the transfer system isn’t redistributive enough – then might that not be evidence of the need for more, not less, regulation? Might we not need to prevent rich clubs from abusing the financial desperation of smaller ones and force them to pay larger fees for players plucked from the lower leagues?

The discussion of the redistributive aspect of transfer fees then moves on to look at their value as a way of compensating selling clubs’ for their investment in player training.

“By treating transfer fees as solidarity payments only the contribution of developing young players is being valued. By contrast, the larger clubs benefit from all aspects of football development at the lower levels. Thus solidarity should not be narrowly focused on the production of young talent for big clubs.”

The ‘thus’ there appears to me, at first sight, as a bit of a non sequitur. It doesn’t’ follow – does it? – that because clubs attain benefits that go beyond player development that focusing redistribution around player development is invalid? A policy doesn’t have to be a complete and comprehensive solution to be a valid policy, does it? If we’re seeking the minimal regulation necessary to achieve a policy aim, mightn’t it make sense to focus on the readily identifiable moment when a player passes from a smaller club to a larger one as the method of redistribution?

Who knows, it might not. But there isn’t a reason given here, just a smoothly slipped-in assertion.

Better regulation – who’s really in favour of real change?

There is then, however, a section that I, as an aficionado of the NFL, agree heartily with. It quotes from the Bosman Ruling that there are many better ways of promoting equality of income and opportunity for smaller clubs – not least a collectively bargained salary cap and redistribution of ticket income among clubs. (Forgive the plugs, but I wrote about the salary cap in my book and how football should share more than just TV money here).

The unspoken – but clearly correct – conclusion in quoting this material is that clubs are engaging in grand hypocrisy in seeking to justify transfer fees on the basis of equality but doing bugger all else to try and achieve it. Quite so.

And, as such, I look forward to hearing Fifpro argue strongly for player wage restraint so as to allow for the introduction of a salary cap creating genuine equality of opportunity among clubs. Likewise, I must have missed the section in the report examining Fifpro’s willingness to introduce a new player solidarity levy on its highest paid members to redistribute their income to Fifpro’s poorest members.

In highlighting the clubs’ hypocrisy and one-sided view of the transfer system, then, Fifpro has managed only to advertise its own. Nowhere, for example, does it address the idea that excessive wages might be contributing to inequality or helping create the parlous financial circumstances that cause some clubs to pay their players late.

Barriers to entry – how do we create more Manchester Citys?

The bit that really astounded me, though, was the section where it’s argued that transfer fees create barriers to entry for smaller clubs; in effect, they reinforce the dominance of big clubs by ensuring only clubs prepared to splurge the cash can break into football’s elite.

“If it were not for the requirement to pay very large transfer fees to acquire the best players it seems likely that more clubs would be able to compete with the elite group. The requirement to spend heavily in the transfer market, before achieving any success in competition, represents a barrier to entry. If transfer fees strictly reflected training costs or foregone revenues, then they would be substantially lower and the barrier to entry would not be so high.”

Would it? Would it really be substantially easier for smaller clubs to break into the elite group? (Now, I’ll say here what I probably should have started by saying: I’m not an economist. I’m sure I’ll have made many errors in my reading of the report; I’m simply not as academically able or as well versed in economic theory as its author.) But it’s such a counterintuitive assertion that, at least for someone like me, it needs justifying.

Because, of course, clubs don’t only have to pay large transfer fees to acquire the best players: they have to pay high wages too (indeed, many argue it’s the key determinant of a club’s final position in the league table). My expectation would be that, far from opening the title race up, nothing much would change in competitive balance terms if transfer fees are abolished. Small clubs would still have to try and sustain a title challenge by consistently identifying undervalued talent (itself a costly activity that big clubs are investing in). Player wages, meanwhile, would likely spiral as money formerly spent on transfer fees will be redirected into player pockets.

And we aren’t only talking about ‘transfer fees strictly reflected training costs or foregone revenues’. With Fifpro also arguing for no transfer window and players being able to break contracts more readily, smaller clubs will have an even shorter period in which to enjoy the services of their best players.

It’s also asserted that smaller clubs will be able to compete more effectively by being able to sign players on short-term contracts. But why would an established player agree to that if a bigger club could offer him a longer-term and more lucrative deal? Well only, I would guess, if a club made such a ridiculously high offer that it either, one, imperilled the club’s financial health or, two, was the product of a rich new chairman’s largesse. Neither appear like a recipe for a sound financial future for football, but rather a way of encouraging clubs to take greater risks by bidding up player wages.

The report also appears to be arguing that FFP restrictions might prevent someone doing what Manchester City did in buying their place at the top table. I’m not sure that the restrictions will prevent that and, further, I’m absolutely clear that clubs shouldn’t be able to do what Manchester City did. Some barriers to entry are fine by me.

Fairness and its place in football

The report concludes that:

“As it currently operates the transfer system sustains the dominance of the elite clubs by ensuring that they are the only ones with the financial muscle to afford the transfer fees payable for the very best players. Thus, as it currently operates, the transfers system is not only unfair to players, it also promotes the opposite of what was intended.”

And there’s that tricky ‘thus’ again. You can argue that players are being treated unfairly (although ‘unfairly’ here seems primarily to mean ‘not being paid as much as an unregulated market would allow’ – rather than the broader sense in which you or I might use it), but it doesn’t follow, I don’t think, that because the transfer system fails to completely achieve competitive balance then it is actively harmful.

And it certainly doesn’t follow that, because something isn’t working as intended, that repealing it will result in an improvement.

To repeat: Fifpro have made no proposals that suggest a deep concern with competitive balance. Rather, the report simply looks to undermine the supposed justifications for the current system.

Fair enough, you might think: it’s not on Fifpro to work this all out alone. Except that, in its own report, it says:

“In assessing these rationalizations it is necessary to consider (a) the impact of removing the restriction entirely and (b) whether there exists a less restrictive alternative.”

This, it seems to me, is exactly what the report doesn’t do. It chips away at the pillars on which the system rests, but the picture it paints of the aftermath of radical reformation doesn’t seem remotely convincing.

Whether you think the current system is ‘unfair’ (however so defined) and however well it may or may not support competitive balance, do you think its abolition is likely to create a more competitive league? Do you think it will really allow smaller teams to assemble and retain a side capable of challenging for the title?

I don’t. How could it?

The scope of the report – and what’s not in there

The most the report persuaded me of was that the current system may not necessarily achieve all its aims. (A case for reform not revolution, I think.)

What I did think, having read it, though, is how misleadingly Fifpro is spinning it. It’s being presented as the last word on the subject – a comprehensive refutation by football’s foremost economist of the case for the current system. But it doesn’t feel like that at all. It’s a research paper focused on the intersection of sport economics and sports law. Football needs a broader perspective than this, does it not, before it overturns something as important as transfer fees?

I’m not qualified to judge the report as a piece of economics, but as a layman concerned about the governance of the game, it feels sorely, well… insubstantial.

I was disappointed to find, for example, no assessment in the report of how the benefits of such deregulation will be distributed among Fifpro’s members nor any attempt to set out how the proposed reforms could be managed to prevent chaos. (Surely this is incumbent on someone trying to reform the system – as the press release claims – for the benefit of all?)

And, while the cases of workplace abuse that the report cites do need tackling, there’s no argument as to why the issues of late payment of wages or bullying couldn’t be addressed without smashing the transfer system. (This is, I think, definitely incumbent on them.)

Indeed, these issues of player harm would, I’d guess, be most likely to relate to the players lower down the leagues, while the broad thrust of its aim in deregulating the transfer system seems likely to disproportionately benefit the better-off players by redirecting transfer fees into signing bonuses and wages.

My conclusion on their conclusions

At its heart, I see this as little more than a classic call for deregulation – the presentation by the self-interested wealthy of their narrow desire to grow ever wealthier as an altruistic attempt to introduce fairness into a market. Because we all know that deregulated markets deliver the best outcomes for income distribution and consumer prices, don’t we?

If Fifpro could just be honest – that it feels that its members aren’t getting a big enough cut of rapidly expanding football pie – I’d be able to respect that. (As I said at the beginning, that’s the job of unions and they should pursue it vigorously.) Without footballers, after all, there is no football. And without elite footballers, there is no hugely rich, televised global game.

But, of course, the same is true of fans, TV viewers, small clubs, grassroots clubs, youth coaches and school sports lessons. We are all stakeholders in the game, we must all have a say in how it is run and to whose benefit.

So, having read the report, do I think abolishing the current transfer system it will actually increase fairness, and improve the financial lot of small clubs, fans and the vast majority of players labouring for relatively poor pay outside the spotlight of the top leagues?

In fact, do I think even Fifpro believes it?

I think it’s about as likely as England winning the World Cup.

 

Martin Calladine

If you enjoyed this, please buy my book “The Ugly Game: How Football Lost Its Magic And What It Could Learn From The NFL”. That way I’ll have the money to write more things you might like. Oh, and please spread the word, too. Thanks a lot.

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One thought on “The Fifpro report on ending transfer fees – a review

  1. Pingback: Fifpro continues to prefer PR to real reform | The Ugly Game

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