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FIFA wants to reign in agents with new rules

Are the new standards fair and can they survive a court challenge?

Soccer - UEFA Europa League - Round of 16 - First Leg - Tottenham Hotspur v SL Benfica - White Hart Lane Photo by Nick Potts/PA Images via Getty Images

With clubs and fans both concerned about wage inflation and cost control, FIFA is taking aim at limiting the amounts that agents can charge. They are putting forward a new series of regulations that they claim will increase fairness and transparency, and football executives hope will help reduce expenses. Let’s take a look at the issue, the proposals and some of the anticipated impacts of the proposed rules.

Background

FIFA has a long history of regulating agents going back about 30 years. The last comprehensive system for agents was promulgated in 2008 and required that all transfers be conducted by licensed agents only, with a very high bar to become a qualified agent. By 2015 FIFA realized that only about 25%-30% of transactions were being managed by licensed agents and deregulated the field. FIFA abolished the licensing system entirely, published a set of guidelines on how “intermediaries” should act and delegated the interpretation and enforcement to the national associations. The national associations applied the rules loosely (at best) and commissions for agents increased fourfold between 2015 and 2019, to about US$654 million.

FIFA’s ‘Intermediaries in International Transfers 2020’ report found an average commission of 17.3 percent for transfers valued at less than US$500,000, compared with an average of 5 percent for transfers valued at more than $5 million (USD).

This led to FIFA drafting new regulations to cover agents that they plan to pass in 2023.

Professionalism and ethics rules

Non-controversially FIFA is once again going to make passing significant exams part of the program to become a licensed agent. While this will have no impact on the big agencies or well-known agents who get talked about on BFW, it should bring up the standard of the quality of representation offered to players at the lower levels of football, if they can find an agent (more on that later). Some are unhappy with this rule as this will prevent players who prefer to be represented by a family member rather than a traditional agent. This includes players like Messi and Neymar.

The new regulations are also said to forbid anyone other than a licensed agent being paid a commission for any part of a deal. Theoretically this would prevent payments to players’ parents etc. as part of a sale package. This seems to be a bit of a paper tiger as there is nothing to prevent a player demanding a larger signing bonus and them simply giving that money to their parent etc.

Lastly the regulations offer clearer, if imbalanced, conflict-of-interest rules. Agents may no longer represent both the buying and selling club in a deal, which would be a clear and obvious conflict of interest. However, an agent may represent both a buying club and a player (when they sign a written waiver of the conflict). Why FIFA feels that players are in a position to waive a clear conflict, but sophisticated entities like clubs cannot is beyond me.

There are also some proposed details about transparency and residency. FIFA would like all transfer fee payments and agent commissions to be funneled through a central FIFA controlled clearing house so that they can track them. FIFA is also suggesting that all commission payments must be directed to the country where the agent is licensed. How agents do their tax planning would not seem to be part of FIFA’s purview, so one has to wonder why FIFA is concerned about where agents receive their money as it has no impact on the football industry itself.

The caps

FIFA plans to introduce caps on the fees agents can charge for various transactions as follows:

  • An agent is entitled to a maximum of 3% of the player’s gross salary when they are acting on behalf of the player.
  • An agent is entitled to a maximum of 3% of the player’s gross salary when they are acting on behalf of the buying club.
  • If the agent is representing both the buying club and the player, where both parties are aware of the possible conflict of interest and written consent has been given, they are entitled to a maximum of 6% of the player’s gross salary.
  • An agent is entitled to a maximum of 10% of the gross transfer fee when they are representing the selling club.

These caps will apply to all agents representing any party (i.e. three agents can't charge 3% each for a total of 9%) and they will also apply to agents who don’t charge a commission but rather charge by fee-for-service, of which there are many, particularly at non first division levels.

Anticipated impact

To understand the impact of these changes on the whole football industry some statistics drawn from FIFA’s own research might be helpful:

  1. The average agent commission for transfers over $5m is 5.8%
  2. The average agent commission for transfers between $1m and $5m is 8.8%
  3. The average agent commission for transfers under $1m is 16.6%
  4. There were 3,558 transfers that used at least one intermediary in 2019; 148 of those transfers accounted for $430m worth of commission out of the total agency fees of $653.9m for the year
  5. That equates to 4.5% of transfers amounting to 65.7% of the total agency commissions

The first, and most obvious impact of these rules is that it is expected to drive the lower class of agents out of business. The agents who handle small deals for players in lower divisions simply will not be able to do enough deals to make a living. The ones that remain will have to do so many deals to be financially viable that quality is sure to suffer. That will cause players at lower divisions to likely enter into worse deals, if they can get representation at all. This one size all approach will badly prejudice the little fish in the game. There is some noise about changing the caps to a sliding scale based on the size of the deal, but no official word yet.

The lower income players will also lose access to services they need. Rolling in the fee-for-service work of representatives means they will less likely to be willing to help with relocation and other player issues as they can’t economically justify it in this system.

The ability to make 10% of the gross transfer fee will attract a strong class of agents to be club agents. The work is simpler, done on a single transaction basis and for a sophisticated client (generally easier work). Many in the industry (includes many players) see the uneven scale as favouring clubs over players.

This will remove parents and other non-licensed family members from representing players in negotiations. Whether this is good or bad is a matter of perspective, but it will virtually force many players to engage agents to do deals that are now done by their relatives etc.

The coming court challenge

All of the major agencies have made it clear that they will challenge this scheme in court, and it looks like they have a good argument to do so.

The scheme forces a cap on one aspect of the football economy, while not forcing a similar cost control measure on any other aspect of the game. It almost feels like this system was designed to integrate with the much-talked-about but never realized “luxury tax” salary cap that was contemplated by UEFA before it released the FSCLR system. However restraining the possible income of one group within the professional football economy to the advantage of others is vulnerable to an aggressive restraint of trade argument both at the European and national level.

In 2015 a German agency took the DFB to court over similar proposals to be imposed on the German football market and won with the judge ruling that such regulation was not coherent with European competition law. FIFA will face similar court challenges, and risks either an outright European loss, or, perhaps even worse, inconsistent rulings across various countries creating new inequities between the various leagues.

Any which way you cut it, agents, and players are not likely to accept these proposed regulations passively and we will be treated to some fascinating fights over the next few years to see how the lucrative slices of the football pie will be divvied up. BFW will try to keep you up to date on this evolving issue.