PROFESSIONAL FOOTBALL SECTOR
PRESS RELEASE
PRESS RELEASE
ANTITRUST AUTHORITY COMPLETES INVESTIGATION INTO FOOTBALL
RECOMMENDS REVIEW OF RELATIONSHIP BETWEEN FIGC AND LEAGUES, ELIMINATION OF CONFLICTS OF INTEREST, REVISION OF THE ROLE OF AGENTS AND IMPROVEMENT OF RESOURCE UTILIZATION. SIGNING OF PLAYERS DURING THE SEASON MUST BE THE EXCEPTION. SALE OF TV RIGHTS USING NEW POOLING CRITERIA TO BE ENTRUSTED TO AN INDEPENDENT BODY.
The Italian Competition Authority, at its meeting on 21 December 2006, resolved to conclude its fact-finding investigation into professional football (soccer); in recent months a first section dealing with the regulation of agents had already been approved. In the final document, which contains various chapters covering all the organizational and managerial aspects of the Federation, the Leagues and the clubs, a number of changes are proposed in order to make football more competitive and to bring it closer to market principles. The following are the major points emerging from the investigation; the report will also be submitted to the Federation and to the ministerial departments responsible.
1)Professional football clubs' revenues: how not to rely on television rights alone
Professional football in Italy is a major industry and the clubs' income is constantly growing. Alongside that fact, though, must be noted the huge overall debt burden run up by the sector in recent years; individual clubs have made large losses, largely due to staff costs, i.e. footballers' pay. On this score, however, recent analyses have shown a reduction in footballers' annual gross pay: during the most recent season, and for the first time since the 2001/02 season, they were paid on average less than one million euros in Serie A while there was a reduction of almost a third in Serie B.
The investigation showed that the financial position of professional football clubs is marked by uncertainty as to revenues; these largely depend on results on the field of play, given that qualifying or not for a European competition, or relegation to a lower league or remaining there - in the face of substantially fixed operating costs – can lead to significant swings in a club's earnings in terms of revenues from television rights, sponsors, ticket sales and subscriptions for the live matches. An analysis of professional football clubs' revenues demonstrated poor use of a number of potential sources of income and, at the same time, heavy dependency on audio-visual rights, which represent over 40% of the revenue of Serie A clubs, whereas 12% comes from sponsors. Merchandising, on the other hand, currently represents an almost negligible source of income for Italian clubs, amounting – on average – to less than 1% of total revenues in Serie A. The investigation highlighted that this is mainly due to the prevalence of counterfeit goods creating a disincentive for the clubs to develop merchandising, at least in its traditional form.
Listing on the stock exchange could also provide the financing necessary for arriving at a better competitive balance in the competitions. But Italian clubs tend to have an uncertain asset base: this is mainly due to the fact that they do not fully differentiate their revenue streams and do not own their home grounds. The poor asset backing and inadequately differentiated revenues would negatively influence the share price of clubs wanting to go public. The price could become extremely volatile and too closely linked to results on the field, with the consequent risk of speculative attacks and takeover bids.
Furthermore, the fact that the stadiums belong to local councils appears to be a disincentive for the clubs in making the necessary infrastructure investments so as to make the grounds commercially viable. Given this context, many clubs are considering either purchasing the existing facilities from their local councils or building new stadiums, though it is not easy to see where they could be built.
2) TV rights: centralized negotiations OK but not mandated by law, and with new "mutual aid" criteria to ensure a more competitive football championship
The Authority's investigation, by way of simulations carried out based on the systems usedin other European countries, showed how the current system for the sale and sharing of television rights in Italy has exacerbated the economic imbalance between large and small clubs.
Centralizing the sale of rights, on a voluntary rather than obligatory basis, could improve the situation but the real problem is the inadequate nature of Italy's present mechanism for sharing out the pie: the current system, under which the clubs must pool 19% of their overall proceeds, is hardly representative of that typical form of solidarity which characterizes sports, when compared with the mechanisms adopted elsewhere in Europe. In France, for instance, more than half of the proceeds are shared equally among the clubs and a 5% share is passed on to the State to promote and subsidize youth clubs as well as to contribute to the growth of other sports.
It also emerged that the unequal distribution of economic resources amongst football clubs seems to have produced negative effects on the sporting competition among the teams in their championships. In Serie A in particular, the investigation noted that final results in the last five seasons showed a wider gap between the major teams and their smaller rivals than was the case in other European competitions. Regarding the dividing up of the proceeds of broadcasting rights, the Leagues, being the representatives of the clubs to which the rules for redistributing the resources apply, are not the right parties to define those rules. Within the Leagues there may be conflicts of interest, for example in the case of clubs whose representatives sit on the Leagues' committees and who, because of that, may be in a position to influence choices as to the splitting of proceeds of television rights to their own advantage.
Hence the Authority believes that the task of allocating funds should be assigned to a third party, or at least to an independent body answerable to the FIGC along the same lines as Co.Vi.Soc., in order to ensure that the sharing out of the resources is organized to provide for reinvestment of the proceeds for the benefit of the competitions as a whole, and indeed for the benefit of football in general.
Thus, it should be stipulated that the sharing be done in such a way as to:
- pool a significant portion of the proceeds (for the benefit of the Serie A and B teams and the football code as a whole);
- assign a not insignificant portion of the proceeds on the basis of merit, irrespective of considerations such as the geographical areas supporting the individual teams which may have nothing to do with the teams' sporting prowess;
- give the technical committee the option of changing the sharing criteria according to requirements which may emerge over time.
3) A new model for relations between players and their clubs
The relationship between players and the football clubs are based on regulations of various kinds, whether it be by national laws (Law no. 91 of 1981) or Federation rules (in particular the NOIF, Norme Organizzative Interne della Federazione, or Internal Organizational Rules of the Federation), or the Collective Accord agreed among the representatives of the parties involved (FIGC, the National League of Professionals and the Italian Footballers' Association). The rules of the Federation and those contained in the Collective Accord are largely based on FIFA's Regulations.
The national regulations do not provide for the possibility of cancelling a contract for just cause or for legitimate sporting reasons. Only in the cases expressly stipulated in the Collective Accord, such as when payments by the club are in arrears, a player is found unfit or unsuitable or the contract or the Federation's rules have been breached, is it possible to cancel a contract unilaterally. Cancellation by mutual consent is always possible.
The Authority holds that the stability of the relationship between a club and its players should be valued for its own sake and should not be adduced solely as a reason to prevent the unilateral cancellation of contracts.
Contractual relationships marked by excessive instability may become prejudicial to the correct running of football competitions since, in the absence of any constraint, the makeup of the teams could be subject to continual change during the course of the competition, to the detriment of the entertainment value of the football and of the principle that sports competitions should take place in a context free of opportunities for collusion among the clubs. However, at the moment, contractual stability seems to be pursued by way of instruments which are either unsuitable for the purpose or are excessively restrictive.
The Authority therefore recommends the following changes to contractual arrangements:
- stipulation of a protected period during which contracts may not as a rule be cancelled;
- introduction of a system of penalties to safeguard the protected period;
- introduction of the principle of unilateral cancellation of contracts for just cause;
- fixing of the minimum duration of contracts to coincide with the duration of the championship.
The trading of players between clubs, too, if not subject to any limitation, may distort competition. This is because the ability to change teams during the championship by way of player “transfers” inevitably creates opportunities for collaboration between clubs and may lead to the undermining of fair play.
So as regards the definitive sale or lending of players, the Authority recommends the following changes:
- establish the principle whereby the Signing Period which falls during the playing season, i.e. the player market in January, must be used only by teams belonging to different divisions or only on an exceptional basis for transfers between clubs in the same competition (for example to replace players who are injured);
- establish that the lending of players between clubs in the same division may take place only at the end of the season;
- ensure the minimum duration of such loans coincides with the whole playing season;
- stipulate the maximum number of players (two or three) that a club may lend per season;
- stipulate the maximum number of players (two or three) that a club may borrow during the course of a season.
4) New regulations for agents: less exclusivity and no conflicts of interest
As to the regulation of agents, the Authority reiterates the positions already expressed in the relevant extract of the report of the investigation.
More specifically, the analysis carried out revealed antitrust concerns in the following areas: i) restrictions on access to the profession of player's agent; ii) standardization of contractual relationships between agents and players; iii) restrictive clauses; iv) unsuitability of the current conflict-of-interest provisions to guarantee equal opportunity to players' agents operating in the marketplace.
As regards the approach to conflicts of interest,the Authority concluded that the role of agent should be forbidden where the objects or beneficiaries of negotiations are the agent's relatives or close family members. This measure, which is included in the FGCI's draft regulation, currently being approved, seemed to respond more closely to the principle of proportionality than the solution originally proposed which declared such family ties incompatible with the exercise of the profession of player's agent.
The Regulations should expressly prohibit the same agent from representing coaches and players at the same time or, at the very least, from representing the coach and players of the same team.
5) Organizational structure of the industry and main points of a reform of the roles of the FIGC and the Leagues
During the course of the investigation it emerged that, from an antitrust point of view, the natural monopoly nature of sporting competitions necessarily conditions the organizational structure of the football business. This means that, for reasons of efficiency, each country has a single body to organize the industry and dictate the rules for the structuring and holding of sporting competitions (the Federations). In all countries, football is organized by way of a federal structure embracing the individual clubs and their associations (which in the case of football means the Leagues).
As was pointed out above, the Authority recognizes that the specific nature of sport in general and of football in particular means that this sector needs to be organized and regulated by a single federal structure, which for football at the national level is the FIGC.
Furthermore, the commonality of interests within the code means it must be subject to regulation, both as regards the purely sporting aspects as well as those aspects that, though they obviously involve the clubs' finances, need to involve the sharing of resources amongst all the participating clubs, or so-called "mutual aid" (such as the sharing of proceeds from television rights).
In this industry, unlike others, the task of regulation is assigned to the associative bodies themselves. This is justified by the fact that, in order to organize the system along the mutual lines mentioned above, such bodies must be able to organize not only the sporting aspects but also a part of the economic implications as well.
From a legal point of view, the regulatory powers vested in the Federation are justified under the laws governing sporting bodies, to which statutory law assigns a high degree of autonomy: this manifests itself in the code's powers of self-organization and self-regulation.
The Italian football system, which only formally centres around the pivotal role of the Federation, has clearly demonstrated functional flaws which are partly due to the ever greater role assigned to the above-mentioned associative bodies (the Leagues) within the federal structure.
As a general rule, then, the activity of the Leagues should mainly concentrate on the formulation of purely sporting rules intended to make their product (the championships and Coppa Italia) more interesting and exciting for the fans, partly by encouraging reasonably balanced competition among the teams.
As it turned out, the investigation found that the Leagues, and in particular the National Professional Players' League, have been given tasks that go well beyond simply organizing sporting competitions. With the development of the economic aspects linked to football, the Leagues have in fact taken on a preponderant role not only in the organization of competitions but also, and above all, as regards the financial interests of their member clubs, in particular controlling the economic obligations contained in contracts for the transfer of players and the sharing out of proceeds from the sale of television rights.
The Leagues have set up a procedure that the operators in the industry call the “clearing house”, which is designed to regulate and administer financial transactions amongst the clubs and the flow of "mutual aid" within the association, as well as having a role in authorizing the sale of players (in effect providing reassurance as to payments to be made).
An examination of the statutes regulating the FIGC and its organizational and representative structure also revealed the significant weight carried by the Leagues in the makeup and election of the federal authorities, in particular the Assembly, the Chairman and the Federal Council, and the consequent influence the Leagues can exercise in those areas.
In order for the Federation to be in a position to represent effectively (and not only formally) all of the parties involved in the footballing world, it must be set above the individual clubs and their associations; and it is equally important that within its executive bodies equal dignity should be accorded to all parties in the industry. In other words, the federal authorities should operate in such a way as not to be subject to undue influence from the associations made up of the football clubs.
In conclusion, the Authority believes that economic questions should not be handled by entities like the Leagues which represent only one of the components of the system (the football clubs), but rather by the FIGC in its role as organizer whereby, as specified in the legislation governing sporting activities, it represents the interests of all the parties involved in the industry.
This reasoning is valid for both the Leagues' tasks in the matter of players' contracts and the pooling and sharing of the proceeds of television broadcasting rights.
As to the first point, the Authority is of the view that there should be a review of the tasks currently assigned to the Leagues regarding the hiring of players (which means those associations are controlling their own members). Specifically:
- the FIGC should be given the task of approving contracts between clubs and players as well as drawing up models of transfer agreements;
- all tasks involving economic and financial controls over the clubs should be assigned to Co.Vi.So.C. whose powers should be extended for the purpose.
Rome, 5 January 2007