To ensure a steady supply of football talent, professional football clubs must do their bit to invest in grassroots football. To incentivise this investment, UEFA and several national football associations introduced “home-grown player rules”, which dictate that a minimum number of players on the match sheet must be home-grown. However, a player, supported by Royal Antwerp FC, claimed these rules are anti-competitive. In a landmark judgment, the Court of Justice (CJEU) agreed that they could be, subject to further analysis by the referring Belgian court.
In this post, we explain that the judgment has some pretty novel views on restrictions of competition by object. But beyond that, it is groundbreaking, because without much fanfare, the Court sets a major precedent for competition enforcement in labour markets. Forget about wage fixing or no-poach agreements, this judgment goes further and establishes that coordination on quantity in a labour market can be a restriction of competition by object, even where that restriction does not obviously help the parties coordinating their conduct.
Home-grown player rules
Home-grown player rules were adopted first by UEFA and subsequently by various national football associations, including the Royal Belgian Football Association. These rules dictate that of the 25 players that can be on a match sheet, a certain number must be “home grown”, i.e., they must be trained by the club itself or by a club in the same national football association before reaching a certain age. For example, the Royal Belgian Football Association held that 8 players on the match sheet had to be trained by a Belgian club for three full seasons before turning 23. Of those 8 players, 3 had to be affiliated club members for three full seasons before turning 21.
The idea behind these rules is that by limiting the number of foreign-grown players that a club can select for its match sheet, clubs are incentivised to invest in their own football academies, as well as in “grassroots football” in their home countries more generally. If there is a healthy supply of good home-grown players, the home-grown player rule does not limit the clubs’ ability to win games, and the football ecosystem flourishes. If, on the other hand, clubs do not invest in such a healthy supply by neglecting the training and education of young players, they are hampered by the home-grown player rule, as home-grown players will tend to be of lesser quality. So, the rational thing to do is to invest in training facilities to ensure a healthy supply of home-grown players.
The judgment
A player, supported by Royal Antwerp FC, challenged these UEFA and Belgian rules, alleging they infringed Article 101 of the TFEU, as well as Article 45 (the right to freedom of movement for workers). The Belgian Court of Arbitration for Sport rejected their claims. The player and club then brought proceedings before the Brussels Court of First Instance for annulment of the arbitration award. The Brussels Court referred questions on the interpretation of Articles 45 and 101 to the CJEU. In this post, we focus on the Article 101 aspects of the judgment.
In its ruling, the Court explains that organisations like UEFA are associations of undertakings, and that the adoption of such a rule is a decision by an association of undertakings. This is an immediate red card to a finding by the Court of Arbitration that “in view of their own distinct character … [the rules adopted by UEFA] could not be considered to be the result of an agreement, decision or concerted practice”. One may have a discussion about their object (or effect), but rules like this fall within the concept of a decision by an association of undertakings.
The Court goes on to assess the object of the home-grown player rule. It repeats familiar case-law in this area, stating that an object restriction involves types of coordination that reveal a sufficient degree of harm to competition, so that it is not necessary to assess their effects. The CJEU says that this primarily involves horizontal cartels, but other forms of conduct can also be considered to have an anticompetitive object, for example where they lead to the exclusion of competing undertakings (such as pay for delay agreements in pharma) or where they are decisions aimed at coordinating the conduct of members of an association of undertakings. Finally, agreements aimed at partitioning markets according to national borders such as restrictions on parallel trade, granting absolute territorial protection, etc., must be categorised as object restrictions. This type of object restriction is a key element of EU law, and it seeks to protect and develop the benefits consumers could derive from effective undistorted competition in the internal market.
Having set out the legal framework, the Court first acknowledges that it is open to associations like UEFA and the Belgian association to adopt rules on the organisation of competitions. It is also legitimate to regulate the conditions in which professional clubs can put together teams. Football is based on sporting merit, and this can only be guaranteed if teams face each other in “homogeneous regulatory and technical conditions”. It can also be legitimate to refer “on certain points and to a certain extent” to national requirements or criteria (which the home-grown player rules are).
In the key paragraph 107 of the judgment, the Court then assesses the “outcome” the home-grown player rules “objectively seek to attain vis-à-vis competition”. In this regard, it approvingly cites the referring court and the Belgian Government, an intervener, in saying that
- the rules limit or control one of the essential parameters of the competition in which professional football clubs may engage, namely the recruitment of talented players, whatever the club or place where they were trained, which could enable their team to win in the encounter with the opposing team; and
- that limitation is likely to have an impact on the competition in which the clubs may engage, not only in the upstream or supply market constituted by the recruitment of players, but also in the downstream market which “is constituted by interclub football competitions”.
The essential question, the Court says, is whether the home-grown player rules limit the access of clubs to the resources essential to their success, and whether they do so to a sufficient extent to conclude that they present a sufficient degree of harm to competition to be categorised as restrictions by object. According to the Court, the proportion of players that must be “home-grown” is particularly relevant in making that assessment.
The Court also considers whether the home-grown player rule could be exempted under Article 101(3) TFEU. The Court holds that the benefits outlined above (incentivising investment in grassroots football) can count as efficiencies, but it must be tested whether less far-reaching measures could achieve the same benefits. This will be for the national court to determine.
Comment
The Court’s logic is that the home-grown player rules limit clubs in their recruitment of players. Restricting the free recruitment of players has a negative impact on the clubs’ ability to win games. However, no mention is made of the fact that the rules apply to the opposing team as well, so the playing field essentially remains level. Are teams less able to win a match because of the home-grown player rule? The answer is not immediately clear when the opposing team must comply with the same rule.
Moreover, the home-grown player rule could be argued not to promote, but to worsen the position of the football clubs. That is a bit odd. When assessing potentially unlawful conduct, it is usually helpful to check who benefits from it, cui bono? Price fixing agreements benefit the price fixers. When an association of undertakings recommends pricing conduct to its members, the members benefit from the reduction in price competition. In blocking the Super League, UEFA protected its own lucrative Champions League, as well as those football clubs not part of the Super League.
Here, the football clubs who are the members of the association of undertakings do not seem to benefit from the restriction of competition brought about by the association. All football clubs are prevented from fielding their strongest team without worrying about including 8 home-grown players on the match sheet. The association of undertakings itself also does not benefit. With all due respect to Belgian football, the Belgian league does not seem to improve by restricting the number of foreign players that can be active in it. Unlike the Superleague and ISU cases, where UEFA, FIFA and the ISU neutralised a threat from rival leagues or tournaments, the home-grown player rule does not artificially improve the competitive position of the Belgian football association or of UEFA vis-à-vis a rival.
Competition law is also about the structure of the market
Of course, competition law is not only concerned with the position of competitors but also the structure of the market. If competition “as a whole” is reduced, Articles 101 and 102 are engaged. The clubs and their associations may not necessarily benefit, but the rule could still harm others.
But even here, the impact of the home-grown player rule is ambiguous. On one hand, the places available to foreign players become scarcer, which could weaken the bargaining position of those players (fewer places means more competition between players, driving their prices down). But the dynamics of sports are more complex than that, as the “supply” of players is heterogeneous in nature, as is the demand. Players differ in quality, and where one club may need a defender, another may require reinforcements up front. Their spending capital will differ too, depending on their debts and whether they have qualified for lucrative tournaments. Players can disappoint after acquiring them or do far better than expected, thus changing their value within the space of a season. Fewer places for foreign players also means the clubs compete even more vigorously for the best players out there, thus potentially driving up the price for those players. Given that the home-grown player rule applies across UEFA, some players may win back in bargaining position in their “home market” what they might have lost in the international market.
It is not immediately clear without assessing the effects of the home-grown rule why this type of coordination reveals a sufficient degree of harm to competition to fall inside the object box, when assessed on the upstream market for the recruitment of players. There is precedent to say that price fixing on a purchasing market is bad for competition. In a recruitment/labour market we would call this wage fixing. But reducing the number of places available to foreign workers, that is not a restriction that has featured in precedent so far. This judgment therefore creates a precedent focussed on job openings rather than wage.
While we knew that quantity fixing between sellers of a good or service could restrict competition by object, this had not been established for arrangements between employers, let alone where the coordination only concerns a quantity restriction for a sub-set of workers. This is where the judgment indeed breaks new ground.
A poorly explained market for “interclub football competitions”
The Court not only found issues in this recruitment market, but also in relation to a second market, for “interclub football competitions”. The judgment is not clear what product market this refers to. Perhaps the competition between clubs? If so, we surely must distinguish between competition on the pitch and competition off the pitch. Competition on the pitch cannot be equated with the competition that Article 101 seeks to protect. Clubs are each other’s “competitors” when trying to win the league, but that “competition” is not the same as the competition referred to in Article 101, which is competition on a market for goods or services.
Take ticket sales. Do two clubs from the same city compete for ticket sales to supporters? Maybe for some tourists, they do. But for most supporters, they do not. An Atlético Madrid fan will not switch to Real Madrid tickets when faced with a price increase for Atlético tickets. The two clubs are arch-rivals on the pitch, but their tickets are not economically substitutable from a fan’s perspective. These are relevant characteristics forming the economic context of football, which should be acknowledged when applying competition law to it. Of course, football clubs are economically motivated entities, and they certainly are active on multiple markets. It would have been good if the Court had dedicated more than those three words “interclub football competitions” to explain how those markets would be affected.
The findings by the Court could be far-reaching. It is difficult to see, for example, how financial fair play rules are different from the home-grown player rule. Clearly financial fair play rules also restrict football clubs’ ability to freely recruit players. Can a clear line still be drawn between financial fair play rules (presumed by many to fall outside of Article 101) and home-grown player rules (anti-competitive by object) on this market for “interclub football competitions”? It may be appropriate for the Commission to publish some guidance in this area.
The elephant in the room, in my view, is the category of object restriction that features in the Court’s discussion of the case-law, but not in its legal assessment, nor in its response to the referring court’s questions: restrictions that partition markets along national borders. That seems to me to be the category of restriction that fits the home-grown player rule most naturally and allows it to be distinguished from the financial fair play rules. Indeed, in today’s integrated Internal Market, it is from a competition perspective difficult to see why the market for players would not operate at least at an EEA level, with no restrictions as to what players to field in a game based on where they trained. It is odd that the Court refers to this case-law, but then does not apply it in its actual analysis.
Why this is a groundbreaking judgment
This is a judgment by the Grand Chamber of the highest court in the EU, so it now sets the standard for rules like the home-grown player rule. And in that sense, the judgment is quietly radical. The market for the recruitment of players is a labour market, no matter how flash the hairdos of the workers that offer their services on it.
Not so long ago, wage fixing and no-poach agreements were considered a “new trend” in competition enforcement. The Commission has yet to finish its first case in relation to these labour-related infringements. A policy debate is unfolding as to how competition law and economics should apply in these markets, which have different characteristics to other markets. More generally, a consensus is emerging that purchasing cartels are bad, but other types of coordination between purchasers are less well researched at present. But now, Europe’s highest court has already found that coordination on a minimum number of “home-grown” workers is evidently anti-competitive.
That potentially supercharges the enforcement of competition law in labour markets. Of course, professional football players cannot be compared with any other worker, but the Court’s findings in this case are not limited to the particular market dynamics of football with its transfer window and high salaries. Arrangements between companies or recommendations by trade bodies relating to labour, including those with benign objectives such as stimulating investment in home-grown workers, can therefore be expected to come under scrutiny. The Royal Antwerp judgment turns the game on its head and leaves us wondering what is next. Its reverberations may be felt well beyond football.
The Thicket 