Case Study: Bosman ruling, restraint of trade and competitive balance

The Australian College of Physical Education (ACPE) BSCA 03/07

Unit Assessment – Task 2: Case Study + Position Stand (50%) Case Study: Bosman ruling, restraint of trade and competitive balance Anthony Siokos (5835) Professional Ethics (PD311) Mr Ben Harris

Due: Week 11, Friday 29/5/09

Introduction The case study chosen for review is the ruling on Union royale belge des sociétés de football association ASBL v Jean-Marc Bosman, Royal club liégeois SA v Jean-Marc Bosman and others and Union des associations européennes de football (UEFA) v Jean-Marc Bosman made by the European Court of Justice in 1995 known as the Bosman Ruling. This paper seeks to identify and comment on the aspects of restraint of trade and competitive balance in relation to this case. A background to the case between Union Royale Belge des Sociétés de Football Association (ASBL) v Bosman will be provided which will include a clear description of the events which took place between Jean-Marc Bosman, RC Liège and the Belgian football authority, Union Royale Belge des Sociétés de Football Association (URBSFA).

An understanding of the labour market in sport will be discussed and linked to the fundamental issue in this case, that being restraint of trade. An examination of the positions taken by all parties on the issue of player contracts and law will be presented and examples will be provided, where necessary, of the outcomes related to the case. A brief snapshot of the history and culture of sports leagues in Europe will be offered to better understand the reasons for the ruling.

An identification of the ethical principle of utilitarianism will be highlighted when discussing the nature of sports leagues, and in particular, competitive balance.

As a result of the Bosman ruling a number of ethical questions have been raised and dealt with in relation to sport and common law by Fédération Internationale de Football Association (FIFA) and Union des Associations Européennes de Football (UEFA); these will be critically analysed.

The deregulation of football player

contracts will be discussed in the context of the free market.

Finally, evidence will be provided and discussed in relation to rectifying the issue of non-competitive balance in modern European football.

An outline and

analysis of FIFA‟s proposed 6+5 rule will be presented; and the issue of globalisation will be scrutinised. The ramifications of this case are multifaceted, only a small number of key aspects will be identified and discussed as the outcomes of this case will continue to be presided-over in the years to come.

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Overview of the Case Study On 15 December 1995 the football transfer market changed forever after a landmark ruling in the case between Jean-Marc Bosman, a professional footballer, and Belgian first division club RC Liège, the Belgian football authorities and the European football authorities (Davies, 2003; McArdle, 2000).

Bosman had a one-year contract with RC Liège which expired on 30 June 1990. At the end of his contract the club offered him a new one. However, they chose to remunerate him at around a quarter of that of his previous contract; he refused and was placed on the club‟s transfer list.

The transfer fee was set in

accordance with UEFA transfer rules but was set substantially high; no club was interested. Bosman then went about securing his own move by striking a deal with French second division club, US Dunkerque; both parties agreed and all that stood in the way of the deal was a transfer certificate (Davies, 2003; McArdle, 2000).

This document had to be sent by the Belgian football authority (URBSFA) to the French football authority, Fédération Française de Football (FFF). However, RC Liège claimed to have doubts over the solvency of the French club and asked that the certificate not be sent; the move never eventuated. Out of contract with RC Liège and unable to secure employment elsewhere, Bosman remarkably was hit with a suspension.

RC Liège then prevented him from playing for an entire season.

Bosman took the matter to the tribunal, the Tribunal de Première Instance (Court of First Instance), and sought an order which would force the club and the Belgian football authority to pay him a monthly advance until he found a new club. The judge ordered the defendants pay Bosman a fee equating to 30 per cent of what he had asked for and referred the case on to the European Court of Justice (Davies, 2003; McArdle, 2000).

On 9 April 1992, Bosman amended his initial claim against RC Liège, brought a new preventative action against the Belgian football authority and reviewed his claim against UEFA. Extraordinarily, Bosman made a claim in respect of the damage suffered by him from 1 August 1990 until the end of his career and in respect of loss of earnings since the beginning of his career as a result of the application of

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the transfer rules. As the claims against UEFA and the Belgian football authority involved a consideration of the Treaty of Rome of 25 March 1957, the European Court of Justice had to act on the matter.

Bosman argued that Articles 48, 85 and 86 of the Treaty of Rome stopped European Union members from having the human right of freedom of movement in employment, claiming a restraint of trade. The European Court of Justice concluded that the rules of private sport associations and the activities of professional football players are in the nature of gainful employment and are therefore subject to community law (Davies, 2003; McArdle, 2000). The key ruling of the court was: players should be free to move when their contracts have expired, there is no transfer fee or ownership of that player and clubs can sign any number of European Union players (ASBL v Bosman, 1995; Grund, 2007).

In other words, the court found in favour of Bosman. Transfer fees for out of contract players were illegal within the European Union; only players with a current contract with their clubs could have transfer fees paid for them. Restrictions on the number of foreign players were lifted; quotas such as the 3+2 rule imposed by UEFA where three foreign players plus two assimilated foreign players could play per team had to be abolished (Pearson, n.d.). As a result of this ruling players have now become the boss in a sense; clubs are now powerless to stop their best players leaving at the end of their existing contracts. The Bosman case was only the start of more legal intervention in an area traditionally regulated by independent sporting bodies; deregulation and free movement has changed the nature of player contract negotiations and opened a Pandoraâ€&#x;s Box.

This presents a number of ethical

challenges within the sport.

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Discussion When considering the repercussions of the Bosman ruling one must look at the issue of restraint of trade to better understand the labour market in sport. Historically and culturally prior to the Bosman ruling the objective of professional football clubs in Europe was to provide entertainment by playing well on the park; as long as clubs remained solvent, maximising profits was not the objective (Dejonghe, 2008). In the latter part of the 19th century professional sporting leagues were formed and labour controls were implemented to create an even competition; this was known as the “retain and transfer system� (Davies, 2003).

The issue of competitive balance was, and still is, an ethical one drenched in utilitarianism; the greatest good for the greatest number (Schneider, 2009). When drafting policy on competition the fundamental element is uncertainty; match uncertainty, seasonal uncertainty and championship uncertainty (Goossens, 2006).

The key ingredient for the success of team sports is the excitement generated from this uncertain outcome; sport is unique in nature as the product or service is instantly perishable (Shilbury, Westerbeek, Quick & Funk, 2009). In order for fans to engage in league games a sports league has to ensure that the teams competing in it do not get too strong or too weak so that competitive balance is preserved (Quirk & Fort, 1992, as cited in Koning, 2000).

However, this issue of optimal competitive balance creates a paradox when considering the position of a footballer post-Bosman. How can a sports league regulate competitive balance when its member clubs are conflicted by deregulation of the labour market where players are now in charge? The Bosman ruling has in fact engendered globalisation in full force. In 2000, the European Commission decided to take further action against the football authorities claiming the international transfer system breaches the right of freedom of movement between European Union states, even for players who are still under contract. They argued that footballers who wish to break their contract of employment should be able to leave with a term of notice, as employees in others sectors do, with a sum of compensation paid in return which would normally be a relatively small amount (Pearson, n.d.).

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On 5 July 2001 an agreement was reached between the football authorities and the European Commission with the outcomes outlined in Table 1.

New transfer regulations applied to contracts signed after 1 September 2001 1. Training compensation for players under 23 to replace transfer fees 2. Protection of contracts for the first 2-3 years by – a sporting sanction of a four month suspension for a player who unilaterally breaches their contract within this period – compensation reflecting the wages and period left on the contract of the player in accordance with national law 3. Movement for players only in 2 transfer windows a season 4. The creation of an independent and objective disciplinary and arbitration system to deal with contractual disputes and compensation Table 1. Transfer regulations applied to player contracts ratified by FIFA in late 2001 Note. From University of Liverpool Football Industry Group Fact-Sheet One: The Bosman Case, EU Law and the Transfer System, by G. Pearson. n.d. Copyright 2009. Retrieved from http://www.liv.ac.uk/footballindustry/bosman.html. Adapted with permission.

Football governing bodies and their member clubs can only transfer players during two transfer windows (as stated in Table 1.); one between seasons and one in January. This agreement has clearly suited the players in most cases more than the clubs and has seen a shift in the balance of power from the clubs to the players who now have significantly more bargaining power when negotiating their contracts than they had prior to the Bosman ruling (Thorpe, Buti, Davies, Fridman & Jonson, 2009).

The key to this discussion from an ethical standpoint is the idea of deregulation, a free market for players to be led by their remuneration in a universally unrestricted environment. Since the Bosman ruling, the outcomes have been positive for globalisation and the financially backed so-called “super clubs” but not so for the less profitable clubs across Europe of which there are many. As a result of the Bosman ruling, clubs can field a team without a single player from that country (Fordyce, 2005). This kind of team selection has become a regular occurrence with clubs such as English Premier League side Arsenal FC and Italian giants, FC Internazionale.

Having a greater pool of talent to draw from within one continent may sound ideal in theory. However, in reality the finest of that talent is now signed by wealthy clubs backed by multi-millionaire and even billionaire owners or groups. If the

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objective of a sports league is to provide competitive balance, one must ask how this is possible when the richest clubs can buy the most talented players and dominate domestic and continental competitions.

Amongst the many domestic league

competitions across Europe, arguably the strongest top flight leagues include those based in England, Spain and Italy. Over the past five seasons in the English Premier League there have only been two different winners, Manchester United and Chelsea FC. Similarly, in Spain the winners have included FC Barcelona and Real Madrid.

In Italy, FC Internazionale has dominated for half a decade. This is clear evidence that competitive balance does not exist in European football. What happened to utilitarianism?

One of the key proposals, presented by FIFA, to rectify this clear imbalance in modern football is the implementation of the 6+5 rule.

Now, this sounds like

regulation and restraint of trade all over again but it seems the powers that govern the game have revised their beliefs on utilitarianism. Essentially, the 6+5 rule states that when a match kicks off there will have to be six players on the pitch on each side who are eligible for the national team. FIFA has claimed this proposed rule does not contravene the European Labour Law on the freedom of movement as clubs will still be able to sign as many foreign players as they choose (FIFA, 2008).

According to FIFA (2008), “the „6+5‟ rule supports another European Law, namely regarding having the broadest and fairest possible competition and restricting the concentration of finances and economic monopolies” (p.1).

In the top five

European competitions, 80 per cent of the teams involved are not battling for the championship; they are battling to avoid relegation to a lower division (FIFA, 2008).

This issue is one of fairness, balance and ethics. Furthermore, national identification and the future of domestic solidarity are at stake. Clubs which train and develop players should be able to keep them in order to remain competitive. The proposed 6+5 rule is directly linked to protecting minors, youth training and national team and league development.

In late February 2009, the European Commission dismissed the findings of an independent report by the Institute for European Affairs (INEA) commissioned by FIFA, backing the 6+5 rule, claiming that if enforced it would amount to

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discrimination in the workplace as it restricts the free movement of workers. FIFA is adamant that the change is necessary and compatible with European law and merely a rule of the game “declared in the general interests of sport in order to improve the sporting balance between clubs and associations and so ensure appropriate sporting competition between clubs and associations” (FIFA, as cited in INEA, 2009).

Among the INEA‟s key findings were alarming statistics on the number of players eligible for the national team of the country‟s football association. “At the highest level, up to 65% of national league players are now not eligible to play for the national team... while up to 50%... are not eligible for the national team of any European country” (INEA, 2009). The protection of competitive balance has become multifaceted post-Bosman. The challenges facing FIFA and UEFA in relation to European law are immeasurably complex; a solution to the problem does not seem likely in the immediate term.

What this does say about the Bosman ruling is that by treating sport and its transfer system as common employment, a paradox has been created. Evidence suggests that in order for sports league to remain competitive some sort of regulation on player contracts is required. As long as the European Commission takes the position of the Bosman ruling, the richest clubs will continue to dominate domestic and continental football competitions. Furthermore, national teams will suffer as a result of less access to playing talent and control of their squads.

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Conclusion In conclusion, the Bosman ruling changed the nature of football sports leagues, player contracts and the transfer system in an unprecedented manner; from player attitudes to the success and shortcomings of UEFA‟s member clubs. No one could have predicted the implications of the claim brought to the Court of First Instance by a little-known Belgian player. Bosman‟s view on his right to gainful employment paved the way for globalisation in football as we see it today.

The uncertainty of outcome drives participation and consumption of sport.

Without this fundamental element, sport would not be the world‟s most favourite pastime. Closeness of competition is vital for the integrity of football; fans pay money to watch the game and sponsors invest large sums to promote and market their brands. The broader issue for the survival of the game is maintaining competitive balance. The Bosman ruling has seriously jeopardised the nature of domestic and continental football competitions as players can now demand high sums of money as a function of the free market.

As a result of the Bosman ruling the richest clubs continue to dominate European football.

Clubs such as Manchester United, FC Barcelona and FC

Internazionale have been unrivalled over recent years in their respective domestic leagues; whilst the majority of clubs competing against them struggle for survival rather than compete for the title. This cannot continue; FIFA has recognised the seriousness of European football‟s current position and proposed the 6+5 rule which would force teams to start matches with at least six players eligible for the national team. Although this proposal has been rejected by the European Commission, the issue is still pending, with FIFA and UEFA determined to find a solution.

It is clear that the issue of professional ethics in football is still deeply rooted in utilitarianism; utilitarianism governs European life and is mirrored in sport. As the governing bodies try to manipulate the rules and regulations which govern the sport in relation to the transfer system and competitive balance; the European Commission will support the rights of players to be considered as employees and stand firm on its

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position on freedom of movement. The Bosman ruling, has perhaps, had the greatest influence on football in its history both morally and ethically.

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Reference List Davies, C. (2003). Post-Bosman and the future of soccer is contract law. Journal of Contract Law 19, 190-202.

Dejonghe, T. (2008). Football in Belgium from centre to semi-periphery: Analyzing the financial ground. International Association of Sports Economists/North American Association of Sports Economists Working Paper Series, Paper No. 08-27.

Retrieved April 30, 2009, from http://www.holycross.edu/departments/economics/ RePEc/spe/Dejonghe_BelgianFootball.pdf Fédération Internationale de Football Association. (2008, May 7). Blatter: ‘6+5’ rule is crucial. Retrieved May 29, 2009, from http://www.fifa.com/aboutfifa/federation /president/news/newsid=762500.html#blatter+rule+crucial

Fordyce, T. (2005). 10 years since Bosman [Electronic version]. BBC Sport Football, 1-4. Retrieved May 29, 2009, from http://news.bbc.co.uk/sport1/hi/football/ 4528732.stm

Goossens, K. (2006). Competitive balance in European football: Comparison by adapting measures: National measure of seasonal imbalance and top 3. Rivista Di Diritto Ed Economia Dello Sport 2(2), 77-122. Retrieved April 30, 2009, from http:// www.rdes.it/RDES_2_06_goossens.pdf

Grund, T. (2007). How to win the Premiership? A network analysis of player transfers in the English football leagues (Draft version). Retrieved April 30, 2009, from http://www.friemel.com/asna/papers/ASNA2007_Paper_Grund.pdf

Institute for European Affairs. (2009, February 26). Legal opinion upholds 6+5 rule.

Retrieved May 29, 2009, from http://www.fifa.com/mm/document/affederation/ federation/01/03/27/09/inea_media_release_e.pdf

Koning, R.H. (2000). Balance in competition in Dutch soccer. The Statistician 49(3), 419 -431. Retrieved April 30, 2009, from http://www.encore.nl/documents/Balancein competitioninDutchsoccer_000.pdf

McArdle, D. (2000). They‟re playing R. Song. Football and the European Union after Bosman. Football Studies 3(2), 42-66. Retrieved April 30, 2009, from http://www.la84foundation.org/SportsLibrary/FootballStudies/2000/FS0302f.pdf

Pearson, G. (n.d.). University of Liverpool Football Industry Group Fact-Sheet One: The Bosman Case, EU Law and the Transfer System. Retrieved April 30, 2009, from http://www.liv.ac.uk/footballindustry/bosman.html

Schneider, R.C. (2009). Ethics of sport & athletics: Theory, issues, and application.

Baltimore, MD: Lippincott Williams & Wilkins.

Shilbury, D., Westerbeek, H., Quick, S., & Funk, D. (2009). Strategic sport marketing (3rd ed.). Crows Nest, NSW: Allen & Unwin.

Thorpe, D., Buti, A., Davies, C., Fridman, S., & Jonson, P. (2009). Sports law. South Melbourne, VIC: Oxford University Press.

Union royale belge des sociétés de football association ASBL v Jean-Marc Bosman, Royal club liégeois SA v Jean-Marc Bosman and others and Union des associations européennes de football (UEFA) v Jean-Marc Bosman (C-415/93) [1995] ECR I-04921.