Analysis of the recent ruling of the 32nd Section of the Madrid Provincial Civil Court, confirming the precautionary measures adopted by the Commercial Court number 3, which prevent the Fédération Internationale de Football Association (FIFA) and the Real Federación Española de Fútbol (RFEF), in defence of competition law, the application and transposition of Article 15(1) and (2) of the Regulations on Football Agents (RFAF), concerning the imposition of limits on fees for the provision of representation services

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The FIFA Regulations on Football Agents and the private enforcement of competition law in the European Union

On 10 May, order number 32/2024 of the 32nd Section of the Provincial Civil Court of Madrid, specialised in competition law, confirmed the adoption of the precautionary measures ordered by the Commercial Court number 3 of Madrid, by order number 344/2023, dated 2 November, requested by the Spanish Association of Football Players' Agents (AEAF) together with eighteen other representation agencies, with regard to the imposition by the federation's regulations of the establishment of limits on the fees received by members of the sector.

By virtue of the same, the Fédération Internationale de Football Association (FIFA) and the Real Federación Española de Fútbol (RFEF) were ordered to refrain from applying and transposing, respectively, articles 15.1 and 15.2 of the FIFA Regulations on Football Agents (RFAF), and the status quo prior to this, with respect to the absence of ceilings on fees, was to be respected for the duration of the proceedings, with the defendants being ordered to pay the costs jointly and severally.

In this context, it should be borne in mind that FIFA, the highest governing body of football at international level, is a private association domiciled in Switzerland, in which the different national federations of multiple countries are integrated as part of the same, including the RFEF, which is in turn a private associative entity, of public utility, governed by Law 39/2022, of 30 December, on Sport and by RD 1835/1991, of 20 December, on Spanish sports federations.

The dispute in question was triggered by the enactment of the RFAF by FIFA, a regulation that came into force in two time periods in 2023, the purpose of which is to regulate the work of football agents, and which has given rise to significant litigation in the European Union, as it contains various provisions that the group concerned considers to be contradictory to competition law.

Under this new regime, the remuneration that agents could receive for the provision of their services in connection with a transaction would be capped at between 3% and 10% of the value of the transaction in question, with different percentages depending on who the client is (a player, a destination club, a destination entity and a player - dual representation allowed - or a home club), and on the annual remuneration of the player or coach contracting such functions (whether or not it exceeds USD 200,000) or on the transfer fee. 200,000) or, in the latter case, the transfer fee.

Thus, the debate on appeal to this second instance focuses on the following three discrepancies on the part of FIFA and the RFEF:

First, the two federation bodies dispute the assessment of the danger of procedural delay - a prerequisite which must be complied with in order to obtain interim relief, thereby avoiding the prolongation of a situation which, prima facie, appears to be unlawful - and thus preventing the defendant from continuing to benefit from an infringing position and the plaintiff from having to bear it, with its undesirable consequences, while the proceedings are pending, and thus preventing the defendant from continuing to benefit from an infringing position and the plaintiff from having to bear it, with its undesirable consequences, while the litigation is being processed - since they do not understand that damage or harm may occur during the proceedings, nor that it may have the quality of being irreversible or irreparable.

This argument is refuted, in defence of the significant loss of assets that a company would suffer for a significant period of time, in the face of an artificial restriction imposed by a third party, which reduces the flow of revenue that should flow as a natural consequence of the exercise of its professional activity, also entailing the unleashing of a series of damages of a different nature. In this respect, it is prudent to consider the high probability that agents may be forced to reduce their business volumes, that they may face liquidity problems, that they may have to make staff redundancies or that they may be faced with the impossibility of undertaking necessary investments in their own infrastructure, not to mention the inefficiencies that this may cause in the market, such as a reduction in the quality of the services offered, by restricting the remuneration that could be received for them, the establishment of another barrier to entry for those wishing to join the profession, or the tendency for prices to be uniform at the established ceiling, as there is no disincentive to depart from it, etc. Re-establishing this type of situation, which clearly hampers the future of a business operation and can even lead the agent to an expectation of uncertain viability within the commercial trade, could prove to be quite difficult.

Secondly, the federations deny the appearance of good faith in the complaint, arguing that the regulation pursued legitimate objectives in a proportionate manner, without infringing Articles 101 (prohibition of collusive acts) and 102 (prohibition of abuse of dominant position), and 56 of the Treaty on the Functioning of the European Union (TFEU), as well as the first two provisions of the Spanish Law on the Defence of Competition (LDC).

In order to give context to its approach, it is particularly FIFA that tries to specify justifications, pointing out that the agents promoted transfers in order to charge intermediation fees, sometimes even prior or access fees, which were not in the client's interest, but in the interest of the agent itself, thus taking advantage of the asymmetry of information existing between them, claiming that they interfered in contractual stability by promoting transfers, and even in the planning of the clubs' squads, with last-minute transactions that could affect the competitive balance, and signifying the existence of conflicts of interest due to the possibility of obtaining commissions from several parties in the same transfer, alleging the need for all of this to be subject to regulation.

FIFA therefore argues that the aim was not for agents to earn less, but rather for their incentives to be aligned with those of their principals, emphasising that the rule introduced does not imply the establishment of an absolute limit, but rather of percentages that align the remuneration of both parties, distinguishing between those of greater and lesser value, only with regard to intermediation services, and not for other services that may be provided.

Without prejudice to what may, in due course, be assessed in the main proceedings, where more evidence will be available, and where the opinion of the Court of Justice of the European Union (CJEU) may even be sought on the matter, before which various courts have already referred questions for preliminary rulings that are currently being processed, the Court reiterates the finding of price-fixing conduct, conceptually observed as a serious restriction from the perspective of competition law.

In this regard, he explains that European case law recognises that decisions taken by an association (professional or sporting) with a view to regulating the exercise of an activity, even if they involve restrictions on competition, may be considered justified if they pursue legitimate objectives in the general interest which are not in themselves contrary to competition, provided that the specific means employed for that purpose are strictly necessary and do not go beyond what is necessary for that purpose (judgments of the CJEU of 15 December 1995, Bosman, C-415/93; of 19 February 2002, Wouters and Others, C-309/99; of 19 July 2006, Meca-Medina and Majcen v Commission, C-59/04); 19 February 2002 - Wouters and Others, C-309/99; 18 July 2006 - Meca-Medina and Majcen v Commission, C-519/04). However, the burden of proof lies with the association which is acting in an apparently anti-competitive manner, and it should be recalled that this criterion cannot be applied to conduct which is so harmful to competition that it can be considered to have the very purpose of preventing, restricting or distorting competition (Judgment of the CJEU of 21 December 2023 - European Superleague Company, S.L., C-333/21).

The legal analysis continues, arguing how it seems quite clear that the sole purpose of such a measure is to prevent agents from being able to charge higher fees than what FIFA considers, at its own discretion, to be appropriate, because it believes that the expenditure of the football clubs will thus be used for other purposes. But why should FIFA, a private operator, decide, and by what benchmark, the appropriate level of such remuneration outside the rules of the market (supply and demand) and the rules of competition law? Given that the economic activity of the agents takes place in a scenario other than that of the sporting competition, it would be understandable, on the other hand, to establish their own regulations that regulate the development of their performance, making the optimisation and greater efficiency of their task compatible with the needs of the football competition, leaving aside problems in other areas.

What is the relationship between the possible conflicts of interest of agents and principals and the limitation of the fees they should receive? What is the need to influence the establishment of a remuneration ceiling? The rules of access to the activity, a code of ethics, the reinforcement of the duties of transparency and information, the provision of rules on incompatibilities, the regulation of the term of the agency contract, etc., are alternatives that already guarantee the protection of the principal's interests.

What kind of causal relationship is there between the protection of the contractual stability of football players and clubs and the setting of limits on the amount of agents' fees? How can it be argued that the higher the agent's fees, the more the number of transfers has been increasing, when the logic should be quite the opposite? By limiting the amount to be charged, in order to optimise profits, the aim would be to motivate a greater number of transactions, in order to compensate for the decrease in income from each transaction.

In the aim of protecting grassroots football, what is the need to contain agents' fees? The contributions by the clubs for this purpose follow a completely separate regime from the remuneration generated by the representation services. The care of the training compensation and solidarity mechanism can be implemented in a more appropriate way, without any interference with the agents' remuneration regime, e.g. by means of collection and resource sharing procedures, or by sanctioning non-compliant clubs, as the two situations are on completely different levels.

Does the need to protect the competitive balance from being affected by last-minute transfers justify the imposition of quantitative limits on agents' fees? Would the introduction of such ceilings help to contain the volume of last-minute player transfers? The players' own interest in changing clubs and the conditions they require to do so, as well as the financial capacity of the clubs concerned, are the most obvious variables that can generate protracted expectations, and long and complex negotiations.

On the other hand, as regards the fact that the limits to the fees for representation services are established by means of a percentage, which was already the usual method of remuneration in the sector, and not on absolute figures, the problem derives from the fact that a private operator, endowed with market power to do so, decides unilaterally to introduce an artificial restriction to those percentages, previously freely negotiated by the third parties involved in the aforementioned operations, unilaterally decides to introduce an artificial restriction to these percentages, previously freely negotiated by the third parties involved in the aforementioned operations, which unquestionably entails the use of a price-fixing mechanism that, a priori, infringes competition law.

Thirdly and finally, as regards the rejection by FIFA and the RFEF of the appropriateness of the imposition of costs in the interlocutory injunction, this is the only ground of appeal which is considered to be justified, in so far as that step is not a mandatory step in order to obtain judicial protection, but an additional and optional step for the plaintiff who, by fulfilling certain conditions and guaranteeing the relevant liability if his claim is later dismissed, can obtain the benefit of having certain favourable effects anticipated at an early stage of the litigation, when the final decision is still pending. Thus, the unsuccessful defendant must be liable for the costs incurred by the plaintiff if he is obliged to follow the compulsory trial to satisfy his claim, in which case he must bear his own costs, unless the plaintiff's claim is dismissed.

The decision of the Provincial Court of Madrid thus joins the one handed down last March by the Higher Regional Court of Düsseldorf, which also confirmed the decision of the Court of First Instance of Dortmund, which upheld the interim measures requested by the German agents against FIFA and the German Football Association (DFB), becoming a reference of the Circular number 1. 873 of the Swiss body, dated 30 December 2023, notifying the provisional and partial suspension of the worldwide application of the regulations.