Dr. Anastasios Kaburakis

1. 2007 NSLI FALL CONFERENCE The Increasing Globalization of Sports: Olympic, International and Comparative Law & Business Issues Comparative Analysis of Sports League Structure, Governance and Player Restraints Conference Panel Dr. Anastasios Kaburakis A Comparative Analysis of Player Restraints and Transfer Rules in European Union and United States Professional and Amateur Sports

2. US and EU Competition and Labor Law Starting Point:

3. US Sport and Law Governing Competition • Antitrust Law • 1890 Sherman Antitrust Act (SAA) • 15 U.S.C. §§ 1-7 • SAA §1: Agreements in restraint of trade • (Per Se v. Rule of Reason analysis) • SAA §2: Unlawful monopolization • Willful exploitation of dominant market power or attempt to gain monopoly power via unlawful means

4. US Sport and Law Governing Competition • Relevant Case Law – Antitrust • Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs259 U.S. 200 (1922) • Dept. of Justice v. NFL 116 F. Supp. 319 (1953) • US v. NFL 196 F. Supp. 445 (1961) • AFL v. NFL 323 F 2d 124 (4th Cir. 1963) • Philadelphia World Hockey v. Philadelphia Hockey Club351 F. Supp. 462 (E.D. Pa. 1972) • San Francisco Seals v. NHL379 F. Supp. 966(1974) • Bowman v. NFL 402 F. Supp. (D. Minn. 1975) • Robertson v. NBA389 F. Supp. 867 (S.D.N.Y. 1975) • NASL v. NFL 670 F. 2d 1249 (1982) • LA Memorial Coliseum Commission v. NFL469 US 990 (1984) • Mid-South Grizzlies v. NFL467 US 1225(1984) • NCAA v. Board of Regents468 U.S. 85 (1984) • NBA v. SDC484 US 960 (1987) • USFL v. NFL842 F. 2d. 1335 (1988) • Piazza v. MLB831 F. Supp. 420 (E.D. Pa. 1993) • Sullivan v. NFL115 S. Ct. 1252 (1995) • Law v. NCAA902 F. Supp. 1394 (1998) • Fraser v. MLS97 F. Supp. 2d 13 (2000)

5. Noted Exemptions from Antitrust Law • 1922 Federal Baseball ruling • Justice Holmes in dictum ruled baseball was “not interstate commerce” exempting it from antitrust law • 1961 Sport Broadcasting Act • Congress enacted the Sports Broadcasting Act (15 USC Section 1291) • Thus, the four major leagues were able to sign agreements pooling broadcasting rights (“sponsored telecasting”), being exempt from antitrust scrutiny

6. US Sport and Labor Law • Important Aspects of Labor Law • National Labor Relations Act • National Labor Relations Board • Collective Bargaining Agreements • League rules negotiated under CBA • Statutory Labor Exemptions • Clayton Act (15 USC Sec. 12-27 & 29 USC Sec. 52) • Norris-La Guardia Act (29 USC Sec. 101-115) • National Labor Relations Act (NLRA) (29 USC Sec. 141-187) • Non-Statutory Labor Exemption • Local Union # 189, Amalgamated Meatcutters & Butchers Workmen of North America, AFL-CIO v. Jewel Tea Company 381 US 676 (1965) • United Mineworkers of America v. Pennington 381 US 657 (1965)

7. US Sport and Labor Law • Labor exemption applications • Mackey v. NFL, 543 F. 2d 606 (8th Cir. 1976) 8 union sponsored players challenged the “Rozelle Rule” – The “Mackey test” The Antitrust exemption could be invoked by a league only when: • Restraint of trade primarily affected the CBA parties • Agreement fought to be exempted concerned a mandatory subject of bargaining • Agreement was the product of arms length bargaining The third element was lacking, hence no league protection via the labor exemption

8. US Sport and Labor Law • Relevant Case Law – Labor Relations • Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs259 U.S. 200 (1922) • Gardella v. Chandler, 79 F.Supp. 260 (S.D.N.Y. 1948) • Toolson v. New York Yankees, 346 US 356 (1953) • U.S. v. Schubert, 348 US 222 (1955) • U.S. v. International Boxing Club, 348 US 236 (1955) • Radovich v. NFL, 358 US 445 (1957) • International Boxing Club v. US, 358 US 242 (1959) • Haywood v. NBA,401 US 1204 (1971) • Flood v. Kuhn, 407 US 258 (1972) • Philadelphia World Hockey Club v. Philadelphia Hockey Club, 351 F. Supp. 462 (E.D.P.A. 1972) • Robertson v. NBA, 389 F. Supp. 867 (S.D.N.Y. 1975) • Kansas City Royals v. MLBPA, 532 F. 2d 615 (8th Cir. 1976) • Mackey v. NFL,543 F. 2d 606 (8th Cir. 1976) • McCourt v. California Sports, 600 F. 2d 1193 (6th Cir. 1979) • Zimmermann v. NFL,632 F. Supp. 398 (D.D.C. 1986) • Bridgeman v. NBA,675 F. Supp. 960 (D.N.J. 1987) • Wood v. NBA,809 F. 2d 954 (2d Cir. 1987) • Powell v. NFL, 678 F. Supp. 777 (D. Minn. 1988), 930 F. 2d 1293 (8th Cir. 1989) • McNeal v. NFL,764 F. Supp. 1351 (D. Minn. 1991) • White v. NFL,41 F 3d 402 (8th Cir. 1994) • Brown v. Pro Football, 116 S. Ct. 2116 (1996) • NBA v. Williams, 857 F. Supp. 1069 (S.D.N.Y. 1994), 116 S. Ct. 2546 (1996) • Curt Flood Act (1998) 15 USC Sec. 27 (a) • MLB v. Crist, 331 F 3d 1177 (11th Cir. 2003) • Clarett v. NFL,369 F.3d 124 (2nd Cir. 2004)

9. US Competition & Labor Law Summary • In the “amateur” section of US sport, the NCAA has enjoyed relief from antitrust scrutiny (w/ 2 noted exceptions) • Congressional intervention (e.g. SBA 1961, CFA 1998) • Practices that would otherwise be declared inherently anti-competitive find a sporting rationale and pass antitrust muster (e.g. broadcasting restrictions, draft systems, salary caps, luxury tax)

10. US Competition & Labor Law Summary • Several major sports leagues’ practices have been declared violations of antitrust law (i.e. cross-ownership restrictions, relocation restrictions, transfer windows, and acquisitions deadlines) under SAA §1. SAA § 2 claims in regard to monopolization and the misuse of a dominant position have been harder to prove • NLRA principles demand bona fide CBA bargaining – Courts give employers the benefit of the doubt • “Mackey test” // NLRA employers’ obligations → Players’ unions may still pursue the negation of a restrictive practice; as a last resort they always have the “nuclear option” of union decertification

11. European Union Competition and Labor Law application in sport

12. EU Competition Law application in sport • EC Treaty [The Treaty establishing the European Community (as amended by the Treaty of Amsterdam)] C 325/35, 12/24/02 • EC Treaty promotes competitive market economy and prevents barriers to integration of the single European market • Article 3 (g): No competition distortion • Article 81 (1 & 2): Anti-competitive agreements prevention • Article 81 (3): Exceptions for promotion of technical and economic progress—allowing consumers a fair price (EU–“sui generis” Rule of Reason) • Article 82: Abuse of dominant position w/i the common market prevention, insofar as the abuse may affect inter-member trade • Article 86 et seq: Allow for State Aid to sport clubs via socio-cultural approach

13. EU Competition Law application in sport • The EC Competition Directorate Director General JF Pons (1999) emphasized: • Solidarity, equality, uncertainty of results • Social expectation of top-bottom € distribution • ISFs may regulate and govern € activity • Distinction of EC Competition policy compliance and sport policy requirements • EC ≠ unjustified restrictive practices of sport orgs. with € impact // EC accepts practices inherent to the nature of sport, necessary for sport org. and justified • Pons (1999): Certain sport policies may fall outside the scope of Article 81 (1) • Game rules • Nationality clauses for international competition v. national teams • National quotas (also see UEFA’s “Homegrown Rule” critique) • Rules for selection based on objective, non-discriminatory criteria • Rules on fixed transfer periods • Rules promoting uncertainty of results, barring other less restrictive methods

14. EU Competition Law application in sport • EC v. UEFA (1999-2003) on Champions League Exclusive TV rights bundling – UEFA (2003) instituted new coverage plan and bidding procedure • EC v. UK Premier League on R. Murdoch’s BSkyB exclusive package • +Television-Sans-Frontier directive (Article 3A): “Important events for society” on free TV

15. EU Competition Law application in sport • EC v. FIA (2001): A SGB/SINGO needs to separate its regulatory from its commercial promotions function (FIA organizing Formula I races “drove out” competing promoters) NOTE: FI v. Soccer

16. EU Competition Law application in sport • EU Commissioner Monti (2001): EC does not care about sporting rules – These are not subject to EU Law; if they are objective, transparent, and nondiscriminatory (OTND) ≠ Anti-Competitive • ECJ ruled that SGB/SINGOs do not enjoy immunity even over the rules of the game; they have to satisfy OTND criteria

17. EU Labor Law application in sport • EC Treaty [The Treaty establishing the European Community (as amended by the Treaty of Amsterdam)] C 325/35, 12/24/02: • Article 2 on Community economic activity • Article 3(c) on abolition of obstacles to freedom of movement • Article 39 (48) on freedom of movement and prohibition of nationality-based employment discrimination

18. Case Law • Case 36/74 Walrave & Koch vs. Union Cycliste International et al [1974] ECR 1405 (Walrave): • “…the practice of sport is subject to Community Law, only in so far as it constitutes an economic activity…” • “…the prohibition on discrimination based on nationality…does not affect the composition of sports teams, in particular national teams…which has nothing to do with economic activity…”

19. Case Law • Case 13/76 Dona vs. Mantero [1976] ECR 1333 (Dona): • “…Rules or a national practice, even adopted by a sporting organisation, which limit the right to take part in football matches as professional or semi-professional players solely to the nationals of the state in question, are incompatible with Article 7, and as the case may be, with Article 48 to 51 or 59 to 66 of the Treaty, unless such rules or practice exclude foreign players from participation in certain matches for reasons which are not of an economic nature and context of such matters are thus of sporting interest only.” • Imprecision in Walrave and Dona led the EC and UEFA (1989) to adopt the “3+2” rule (3 non-nationals and 2 assimilated players)

20. Case Law • Union Royale Belge des Societes de Football Association, Royal Club Liegeois, UEFA vs. Bosman, case C-415/93 [1996] ECR 5040 (Bosman): • Article 48 of the EEC Treaty precludes the application of rules laid down by sporting associations, under which a professional footballer who is a national of one member state may not, on the expiry of his contract with a club, be employed by a club of another member state unless the latter club has paid the former club a transfer, training or development fee • Article 48 of the EEC precludes the application of rules laid down by sporting associations under which, in matches, in competitions which they organize, football clubs may field only a limited number of professional players who are nationals of other member states

21. Case Law • ECJ (12/15/1995) in Bosman: • Transfer rules = Obstruction of free movement • Due to social importance of sport… teams’ balance, equality, uncertainty of results… recruitment & training of young players are legitimate • Transfer rules ≠ adequate means for balance • Same aims can be achieved via less restrictive means (salary cap, redistribution of ticket sales, broadcasting contracts, etc…) • Nationality clauses = Discriminatory under Article 39 (48) • Render freedom of movement inapplicable • Not pro-competitive (richest clubs + edge)

22. Case Law • Advocate General Lenz interpretation of Articles 81 & 82 (ECJ did not examine Competition Law application): • Should be no exemptions on sporting grounds, as nationality rules prevented free competition for players, thus constituting an agreement sharing sources of supply under Article 81 (1) c • Transfers were substituting supply and demand principles, thus depriving of competitive opportunity • No reason for sport labor to fall outside the scope of Article 81 – No CBAs but horizontal agreements between clubs (Competition Law applies) though no abuse of dominant position (Article 82) established

23. Case Law • Post-Bosman decisions, ECJ’s stare decisis, verification of new age in EU sport and policy initiatives to control it: • Ballock case, OJC-99/23, Settled out of court • CE 30/12/2002, # 219646, FFBB affaire Malaja, Court D’Appel for Malaja • C-162/00 Pokrzeptowicz-Meier [2002] ECR 1-1049 • C-438/00, Deutscher Handballbund vs. Maros Kolpak, ECJ 8/5/2003 • C-265/03, Igor Simutenkov v. Abogado del Estado and others, ECJ 12-04-2005 • http://www.curia.eu.int/en/ • http://www.curia.eu.int/en/instit/presentationfr/index_cje.htm

24. Case Law • C-176/96, Jyri Lehtonen and Castors Canada Dry Namur-Braine ASBL vs. Fédération Royale Des Sociétés De Basketball ASBL [2000] ECR 2681 (Lehtonen) • Discriminatory transfer windows (NOTE: Differentiation of EU imports and outside-EU-zone players, i.e. NBA) • C-51/96 and C-191/97, Christelle Deliege vs. Ligue francophone de judo et disciplines associées ASBL, et al. [2000] ECR 2549 (Deliege) • EC Treaty applies to athletes engaging in commercial activities, even if they are not per se “professional” • Selection criteria for ISFs and NGBs are inevitable, hence no unrestricted open entry into international competitions

25. Policy development • UEFA’s “Homegrown rule”: • 4 players shall be “locally trained” • Reduced squad size (25) • Local training = Registered w/ club 3 years/seasons while 15-21 year-old Beginning 2006-2007 season • As often the case with policy initiatives, reactions have been split • Legal scholarship argues that it would be found in violation of the EC Treaty (Briggs, 2005; Parrish 2005; EurActiv, 2005; Asser Instituut & Lancaster University, 2005)

26. Policy development • EC &FIFA/UEFA (2001) agreed on a new elaborate transfer system ≠ FIFPro participation (+club segmentation, protection of youth training, solidarity mechanism, alternative dispute resolution) In CAS 2005/A/899 (Aris) FC Aris Thessaloniki v FIFA & New Panionios N.F.C. FIFA acknowledged its inability to unilaterally Enforce its sanctions; it recommends action to Member federations (Aris, par. 45)

27. …in a nutshell • EC Treaty Articles 3, 81, 82 are applied in sport settings, in the cases sport is treated as a commercial activity; otherwise there is no sport-specific exemption from EU Competition Laws (v. US antitrust exemptions, CBAs//NLRA, SBA 1961) • Buttress for the “social, educational, and cultural character and contribution of sport”, EC Treaty Articles 86 et seq. allow for states assuming the burden of clubs in financial hardship • EC policy, ECJ, or national courts or commissions’ decisions control horizontal restraints in sport, promoting the socio-cultural model, i.e. against exclusive licensing –unless it protects the weaker financially clubs— separating the regulatory from the commercial activity of sports organizations, yet allowing for considerable regulatory autonomy, provided sport purposes are served in OTND manner

28. …in a nutshell • Bosman and Post-Bosman cases led to a free sport market and free sport labor, forestalling transfer and nationality rules in the EU, including labourers originating from trade associations’ countries, according to the recent ECJ decisions extending Article 39’s scope • no collective bargaining exemptions in EU sport -- sport labor is not treated differently • Access to sport employment and international competition participation opportunities may be controlled by reasonable rules according to Lenz, Monti (2001), and Deliege (2000) • The conflict between EU law and SINGOs is resolved by dialogue between the EC and the SINGO, as in the case of the new FIFA transfer system (& UEFA Homegrown Rule). As long as EU Law and EC criteria are met the EC will not intervene

29. Conclusion • The two often conflicting worlds have more in common than what critics assume • Recent policy intervention by the respective legislative branch aimed at treating the same problems in both worlds • EU model is not a “purely” socio-cultural model, as it features much commercialism force of its own, to which policy evolution and the judicial branch attend

30. Conclusion • Ironically, considering the popular European fiction of the “socio-cultural” approach, the US sport model allows for more specific exemptions from competition laws at this point of regulatory evolution • EC Treaty Articles 86 et seq. allow for state intervention practices [“special liquidation” criticized by Dedes (2005)] ≠ US policy (NCAA tax exempt status and public financing of professional sports facilities?)

31. Conclusion • Both US Congress and EC intervene in sport matters • Considering commercializing forces existing in contemporary sport, political intervention appears crucial for preservation of important principles and traditional sporting values • Political support has a place in sport; the latter needs the former.

32. Discussion • Global commercialization of sport creating the need for a new law and policy reality in the sport industry?

33. Discussion • Antitrust – Competition Law exemptions… • Purpose? • Need? • Scope? • Compromise (EU?) Would the “socio-cultural” model be served better via careful application of EU Law? Should we segment the business side of sport (+ exemptions) from the “socio-cultural” side?

34. Discussion • Thoughts on EC Treaty Articles 86 et seq. and the practice of special liquidation (states “saving” clubs from extinction) • Thoughts on practice of political intervention

35. Discussion • Meca Medina, Piau, and Oulmers (pending) • Latest ECJ cases • Application of Competition Law, Articles 81 and 82 (+Art. 39/49)

36. Transfers • 1891 – English Soccer clubs recouping training cost, controlling player mobility, promoting competitive balance • Transfer windows – Competition aspect? • Transfer fees U-23 (for training incurred U-21)

37. Transfers • UEFA report 1973: “It will come a moment in which individuals will start to claim their rights under EC law for free movement and employment. The professional players will then have a tendency to invoke free movement to attack the international structure of football” (UEFA 1973: 5) • After Bosman (1995) the nationality quotas were lifted immediately, however the transfer system entered into long series of negotiations b/t the EC and FIFA/UEFA (frictions b/t the two) • FIFA & FIFPro v UEFA • 3/2001 FIFA/UEFA agreement w/ EC (w/o FIFPro) • 7/2005 New FIFA Transfers and Status of Players rules

38. Players Restraints • Rights of acquisition (option rights) • Enable a club to acquire a player w/i set time by paying stipulated transfer fee • Rights of preference (preemption rights) • Enable a club to acquire a player only if the club that holds the rights decides to transfer the player. May allow interested club to obtain a preference over other clubs at point of decision by the transferring club. The practice requires more than matching rival offers; other conditions apply (see Real Madrid & F.C. Barcelona supplemental transfer fee)

39. Players Restraints • Non-EU nationals may benefit from non-discrimination treaties • Association and trade agreements (Kolpak and Simutenkov) • Cotonou agreement (ACP countries)

40. Players Restraints • UEFA Homegrown Rule (off: “Locally Trained Players”) • EC dismissed early post-Bosman idea (4/96) • EC and EP sympathetic to the idea (2005) • 8 players shall be “locally trained” (08-09; 6 for 07-08) • 4 “Club trained” + 4 “Association trained” (3+3 for 07-08) • “Club trained” = Registered w/ club for 3+ years/seasons while 15-21 • “Association trained” = As above registration by club OR by other clubs affiliated to the same Association • Reduced squad size (25) • No mention of nationality

41. Players Restraints • Fixed-Term Contracts • Bosman creating new transfer system • ISFs decide on particular length • FIBA (H3.4.3: 1-4 years) • FIBA Europe (94.2.3: 1 year min.) • FIFA (Transfer Rules Art. 18.2: 1-5 years) • Under 18 (3 years max.) • IIHF (11.3: spec. term) • Termination for just (and sporting just) cause

42. Players Restraints… but also benefits • Tax exemptions (for national team and club play) • Preferential treatment for athletes U-18 with participation on national teams and nationally competitive clubs re: University entrance examinations • Civil service, government, sport administration positions, and exclusive licenses to operate sport betting offices • Immigration Law exemptions

43. Greek Sport Law ν. 2725/1999 (ΦΕΚ 121 Α΄) • Pro sport contract duration: ½ - 5 years • 18th birthday + obligation to sign with the current club a 1-3 years contract; the player can agree to extend the duration to 5 years • Agents can sign up to 20% of players on each team of the particular league • “National team service is the utmost obligation of the athletes…” • Sanctions involve competition ban for national team and club games, as well as termination of various benefits received from the state. • Compelling reasons for U-18 transfer: • Club solvency, lack of BoD, lack of financial support for athlete, “mental and psychological separation” b/t club and athlete, lack of monitoring athlete progress, lack of medical insurance coverage and physical fitness documentation

44. FIBA • Minor (but key) differences b/t FIBA and FIBA Europe rules (e.g. first pro contract duration) • Noted restraints • No international transfer U-18; exceptional cases referred to Secretary General of FIBA • Mandatory first pro contract procedure, favoring development club • Compensation system upon player refusal • Redistribution of sum by Federation to development club(s) • Option of FIBA to decide on transfer fee amount

45. FIBA • Noted restraints • Licensing and Letter of Clearance restrictions • National team – related restraints: • Obligation of club to release the player “without any financial indemnity” and cover player’s insurance • FIBA Europe forecasts: Federations need to insure player contracts with the club as the beneficiary • Obligation of player to reply affirmatively • Sanctions for club and player (FIBA H.3.6.3.4; FIBA Europe 102) • FIBA Europe – ULEB entanglement

46. FIBA—NBA • 3/14/1997 FIBA—NBA agreement • FIBA Europe/ULEB calls for amendments • Annual renewal • Purposes: • Honor valid contracts on both sides • Ensure compensation for US players on FIBA teams • Introduce binding and final arbitration

47. FIBA—NBA • Agreement specifics: • “Player Contract = written agreement for a specified term and for a specified salaryor other compensation.” • Licensing system, Letters of Clearance, mutual requests re: contract status • “Any disputes… shall be resolved finally and conclusively by an International Arbitrator” • Mutual best efforts deterring interference w/ contract • But for date conflicts, NBA shall permit participation on national teams, and will not impede directly or indirectly such participation. NBA will not request any fees from player or Federation, except reasonable and adequate insurance coverage

48. FIFA • Recent change of national teams’ eligibility requirement for international competition in favor of citizenship • Obligation of clubs to release players for national teams’ matches, w/o compensation/insurance coverage (Transfer Rules Annex 1, Art. 1-3) • “As a general rule, every player… is obliged to respond affirmatively” *

49. FIFA & Oulmers • C-243/06 Charleroi & G-14 Group v FIFA (Oulmers) • Belgian Commercial Court referred Q to ECJ: • Do obligations of clubs to release players w/o compensation and the • Unilateral and binding determination of international matches calendar • Constitute unlawful restrictions of competition • Abuses of a dominant position or • Obstacles to the exercise of fundamental freedoms (per EC Treaty Art. 39, 49, 81, and 82)?

50. FIFA & Oulmers • Charleroi lost the services of Oulmers after injuries sustained during international competition with the national team of Morocco • G14 claiming €860mil. in various damages from FIFA (rejected by the Belgian Court) • A year and a week ago FIFA’s lead counsel, Heinz Tännler, observed that FIFA might consider establishing an insurance and compensation fund for international players (criticized due to time constraints and unilateral level of action by FIFA v including clubs in the decision-making process) • The matches calendar issue was not addressed