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    Can I Negotiate with Myself? Football Agents & Multiple Representation

    By
    Dr. Erkut Sogut , Jamie Khan
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    0

    Currently, multiple representation is very common in the football world. The term refers to an instance where the agent represents more than one party in a transfer negotiation: at least two out of the selling club, the buying club and the player themselves. These agreements may occur in order to simplify a transfer deal by directing it through a single negotiator. The agent may have a particularly good relationship with each of the clubs and knows or represents the player involved. A multiple representation agreement may result in larger payouts to the agent, but the clubs are not forced to use this method, they may choose to do so in order to successfully acquire a player they desire.

    In this week’s episode of the blog, I will discuss the changes that FIFA are proposing that will restrict multiple representation to no more than one particular scenario of dual representation. I will explore the legal and ethical implications of multiple representation and consider how the regulator will be able to handle some of the challenging situations that may arise despite the changes in regulation.

    At the moment, FIFA’s regulation of agents, that came into force in 2015, gave some guidance but delegated the policing of agents to the individual national football associations. For example, the FA in England or the DFB in Germany have been responsible for setting out their own clear regulations surrounding the legalities of an agent engaging in multiple representation. The practice of multiple representation of up to all three parties has been possible during this time and has offered big opportunities to agents who could receive remuneration from the player, the buying club and the selling club in a single transfer. 

    The transfer of Paul Pogba from Juventus to Manchester United in 2016 is the most publicly well-documented case of multiple, tripartite representation. In order for the agent, in this particular case Mino Raiola, to have legally acted as the agent of all three parties, he must be in compliance with the multiple representation regulations of the English FA and the Italian FIGC. To been seen as adhering to these regulations, he was required to have lodged his representation agreements with the FA as well as obtaining written consent from all three parties accepting the issues of multiple representation. Prior to this, both clubs and the player must have been made explicitly aware of the inevitable conflict of interest that would arise as a result of acting on behalf of each interested party as well as disclosing the terms of representation and the fees that he was entitled to from each contract. The FA referred to this as the ‘duty of disclosure of the full particulars’ of each agreement to the others in order to fulfil the obligations of transparency demanded under the regulations for multiple representation. As long as the agent is not concealing information or could be accused of misrepresentation then no rules are being broken. 

    At this point you may be asking why there is an issue with multiple representation if the practice is legal under the regulations of a football association. FIFA is proposing changes because of a number of issues that arise from such transfers. There are ethical implications surrounding conflicts of interest as well as legal difficulties, separate from football legislation, such as tax problems. In order to analyse the effectiveness of FIFA’s proposals in solving these problems it is important to understand exactly what FIFA intends to change. The suggested new regulations concerning representation are outlined below:

    1. An intermediary should only perform his/her services on behalf of one party. There is only ONE exception to this rule (2)
    2. The agent can legally act on behalf of the individual player and the engaging club ONLY if the following criteria is met:
      – Both parties are made aware of the conflict of interests that will arise as a result
      – The details of both contracts, including the terms of service and the terms of remuneration are fully disclosed to each party
      – Both parties have the right to seek independent legal advice on the matter
      – The player must have a preexisting representation contract with the agent, lodged with the National Association
    3. This means that the agent is not entitled to simultaneously represent the buying club and the selling club; the selling club and the player; nor ALL THREE PARTIES

    First and foremost, the primary purpose of these new regulations would be to prevent instances where the agent is able to represent all three parties. The regulators are also aiming to minimise the conflicts of interest that would occur in dual representation agreements. They have suggested these changes as a sign of intent to achieve the fundamental principles that must be met in order to improve the football industry. As I discussed in last weeks episode of the blog, it is important for FIFA to increase the transparency of agents in football. Instead of relying upon National Associations to make their own judgements on dual representation, FIFA wants to harmonise and coordinate the regulations to create a more robust and consistent system. The new regulations would incur sanctions and penalties if they are violated, and if the agent is found to have committed a ‘misconduct offence’. Penalties would include punishments such as loss of remuneration for the agent from affected parties.

    The ethical foundations behind the new regulations are centred upon the conflicts of interests. When an Agent signs a representation agreement, they are obliged to fulfil the fiduciary, contractual duty of acting in the best interests of the party that he or she represents. For example, representing the buying and the selling club would be prohibited by the proposal as there is an obvious contradiction in trying to negotiate the lowest price for the buying club whilst pursuing the highest price possible for the selling club. By representing the buying club and the player, these conflicts might not be as prominent and has become an established system used by agents and clubs especially in the United Kingdom. However, once an agent is responsible for more than one party, there is an ethical dilemma in being able to satisfactorily act in the best interests of both parties within a dual representation contract. Even though FIFA would rule out the possibility of the most contradictory relationships, there is still a level of difficulty in achieving the best for the player and the buying club. This would become evident when an agent is trying to achieve the highest salary possible for the player whilst also trying to minimise the expenses for the buying club that they are also representing.

    A challenge that FIFA might face is the possibility of parties finding ways around the system. For example, ‘party switching’ is currently a prominent issue in German football. This is where an agent will terminate their contract with a player just before a transfer and then act on behalf the buying club instead. The player then declares that they did not use an agent in the transaction. FIFA will prevent this by capping the commission of an agent to only 3% if acting on behalf of the buying club. To maximise their commission to 6%, the agent must have an acceptable dual-representation agreement. This will have a positive effect on the transparency of the agency industry, especially in the German market.

    There are many other instances that FIFA must consider for their proposals to be ethically and legally sound. How would they regulate scenarios such as if three agents represented the buying club, the selling club and the player in a single deal but each of these agents were part of the same agency firm? There seems to be a conflict of interests and a valid legal question to be raised here, but they are officially independently registered agents so would seemingly comply with FIFA’s rules around multiple representation, despite working for the same company. 

    What about when an agent represents the player, the buying club and the coach of the buying club? How does this create conflicts of interest?

    Another legal consideration that FIFA must make is how this new system will affect tax payments. Players and clubs are taxed differently. In many cases the club will pay the 3% commission owed to the agent by the player on their behalf. The player is then shocked when they are taxed on this payment that was paid by the club. In the future, it will become more commonplace for the agent to be paid directly by the player. FIFA might find a way of regulating this by introducing a minimum income threshold that places the responsibility of agent remuneration on the player. It must be ensured that their new proposals do not allow for clubs to place the tax burden of agent commissions onto the players without their knowing. 

    In conclusion, the proposals of FIFA to completely ban the ability of a single agent to represent the buying club, selling club and the player is a move in the right direction. They are showing an admirable desire to solve the problems around conflicts of interests and unethical practice. Attempting to create universal regulations on the matter shows promising intention to increase the transparency and legality of agents in football. The theoretical foundations for these improvements will be in place but it remains to be seen as to whether they will be practically successful and effective as solutions. In my opinion, it is important to prioritise the education of agents and club officials to encourage them to fully understand conflicts of interests and other issues that may arise from dual representations. Perhaps in the future the best option may be to completely restrict representation to a single party. However, this is easier said than done and FIFA would have to find a method of enforcing the law and appropriately sanctioning the agents that break such laws or try to find alternative, ethically questionable methods of multiple representation.

     

    Will FIFA Cap Football Agent Commissions?

    By
    Dr. Erkut Sogut , Jamie Khan
    -
    0

    In 2015, FIFA made the decision to deregulate the football agent industry. Whilst they recommended that clubs and players implement a commission cap for agents of 3%, this was rarely adhered to. In the years that have followed the football world has seen enormous transfer fees and rising agency commissions.

             In general, transfer prices and player salaries have risen, and therefore, so have agent commission fees. In 2019, USD $653.9million was paid in agency fees (FIFA TMS). A significant proportion of these payments came out of the pockets of the clubs rather than directly from the players themselves. Consequently, FIFA has decided to address the worry of many clubs and football stakeholders that too much money is flowing out of the game and into the agents’ wallets. FIFA accepted that the 2015 deregulation did not have the intended effect upon the industry and have proposed a set of reforms in agency regulation that I will be exploring within this series of blogs. I will begin here by outlining the commission caps that FIFA are intending to implement and discuss whether it is a practical and effective way of solving the issues it aims to address.

             FIFA have decided to install commission caps, primarily to keep as much money as possible in the game. This stems from the feeling amongst some major figures in the football world opposing the disproportionately high level of remuneration that agents are currently receiving. The intended commission restrictions proposed by FIFA are as follows:

    1. An agent is entitled to a maximum of 3% of the player’s gross salary when they are acting on behalf of the player
    2. 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
    3. 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
    4. An agent is entitled to a maximum of 10% of the gross transfer fee when they are representing the selling club

    The secondary aims of these reforms for FIFA are centered around the desire to maintain and protect the integrity of the sport and align agency fees with solidarity and training compensation payments that are currently far below the figures paid for agency fees.

    My view is that the biggest issue that would arise from capping agent commissions is the effect that it will have upon the industry. By looking at the current statistics for agency fees across the FIFA TMS it is clear to see how these regulations would cause such a problem. For context, I have outlined some of these statistics below:

    1. Currently, the average agent commission for transfers over $5million is 5.8%
    2. Currently, the average agent commission for transfers between $1-$5million is 8.8%
    3. Currently, the average agent commission for transfers under $1million is 16.6%
    4. There were 3558 transfers that used at least one intermediary in 2019, 148 of those transfers accounted for $430million worth of commission out of the total agency fees of $653.9million for the year
    5. That equates to 4.5% of transfers amounting for 65.7% of the total agency commissions

    There lies the problem. The football agent industry already shows the typical characteristics of an oligopoly. The small number of agents that dominate the industry are largely responsible for the staggering value of fees paid to agents. These agents would not be hugely affected by the new FIFA regulations as shown by statistic 1, as their average commission is only 2.8% above what FIFA intend to cap it at (3%). The damage would be done through its impact upon young agents trying to break into the industry or on those that have established themselves in the lower divisions of football. If the FIFA commission cap is approved, it would have a drastic effect on this side of the agency industry. The dominant agents would survive and gain a further oligopoly on the market whilst those at the other end would struggle to continue and make enough of a living. If they were suddenly limited to 3% commission when previously they could earn an average of 16.6%, they would then have to make an extortionate, unrealistic number of transfers in a year to be able to succeed and continue as an agent. The huge discrepancies in agency fee figures from 2020 across each of the English football leagues demonstrate this problem:

    1. The Premier League paid £272million to agents
    2. The Championship paid £40million to agents
    3. League 1 paid £3million to agents
    4. League 2 paid £1million to agents

    The figures for the lower leagues are particularly low, especially considering that it is likely that most of the agents dealing with league 1 and certainly league 2 players would currently be aiming to collect around 16% commission. If they can barely amass a few million amongst them currently, there is no chance they will be able to survive if their commission is lowered by 13% as a result of FIFA’s new regulations.

    If FIFA truly feel that it is unavoidable to have to introduce a capping system, I would argue in favour of a gradual capping model. Placing commission caps into a tiered system is a preferable approach to tackling the issue of huge agency fees. For example, dominant agents that are dealing with transfers above a certain value may be limited to 5% but FIFA must consider that this is not sustainable or feasible for agents dealing with much lower transfer fees and so their commission cap should be adjusted accordingly in order to ensure they are entitled to enough to survive.

    Another major problem that FIFA will encounter is whether a hard cap is in line with European competition law. It will be interesting to see if the proposal will survive the legal challenges that it will inevitably face. Within a free market, the agency fees have grown simultaneously with the rise in transfer fees and player salaries. It seems that it will be difficult for FIFA to convince a European court of law that their proposal is legitimate, necessary and doesn’t undermine the laws of competition and unfairly restrict the amount that agents are able to earn. Especially after the FIFA TMS statistics have shown that this would not appropriately reflect the market.

    It is highly likely that agents and agent associations will oppose the commission cap and the appeal may be processed in court to judge whether the proposals are in line with European Law. In 2015, a German agency took the Deutscher Fussball-Bund (DFB, the German Football Board) to the national court over a similar attempt to limit the money that agents were able to make through German football clubs and players. The German court voted in favour of the agency as it agreed that regulating and restricting earnings was not coherent with European competition law. It is possible that FIFA will face the same legal proceedings and outcome with their current proposal. In the future, different regulations may come into place in different countries. The national law will always take precedence over the FIFA laws and national associations may take it upon themselves to control agent commissions. For example, the German court has ruled against exclusive representation of a player whilst in England and other countries most contracts give exclusivity rights to the agent. The same thing may happen with commission fees, regardless of the rules that FIFA bring in.

    It seems to me that the clubs themselves are strong advocates for the lowering of commission fees for agents. This is likely because they are often the ones who pay the agents. Despite the common contract stating that the players are the ones who pay the agents out of their salary, in reality, it is often the club who pays, and the player’s salary is not affected. The European Club Association (ECA) may view the proposed regulations as an opportunity to minimise the expenditure of clubs on agents’ fees and will want the cap to be approved.

    It really doesn’t make sense however that an agent representing the selling club is able to make more from commission than an agent who is acting on behalf of the individual player. That undermines the services of an agent who is there to seek the best interests of his player and offer a wider service of care to them. The new commission caps would encourage agents to act on behalf of selling clubs if they wish to earn the most money. The implications of this are that players are reduced to commodities, traded between clubs. Most agents would aim to earn the 10% remuneration from selling a player rather than 3% commission for looking after a player. So, who is left to care for them?

    FIFA believe that the new regulations will protect the integrity of football as commission figures will be disclosed to increase transparency. I worry that this may actually have an adverse effect upon football’s transparency. Agents will turn to alternative methods of collecting their remuneration, such as one-off payments from players or clubs rather than through commission from a transfer. This will lead to shady, potentially unethical activity, damaging the integrity of the sport rather than upholding it as FIFA intend to do. It is not a fair solution to only cap the agents and not look for opportunities elsewhere within football that may help solve the problem. Unfortunately, agents are not stakeholders in football which makes it difficult for them to have an influence. Consulting the agents for feedback is good but is not enough to produce a desirable outcome for everyone and for football. For this to be possible, agents must become stakeholders in the industry. Currently, players and clubs are represented by their respective boards and associations whilst agents are left to fend for themselves.

    In conclusion, the basis of FIFA’s proposal for new agent regulations is legitimate. Agency fees are particularly high and FIFA’s desire to protect the integrity of football, increase transparency and keep money within the game is admirable. However, hard caps create more problems than they solve. The current suggestion of capping commissions is unfair, unreasonable and unrealistic. It has a major obstacle in its way to begin with in getting past the agents and the European court of law unopposed. If they were approved, it would result in a variety of problems in the agency world such as an overwhelming oligopoly in the industry, immoral methods of earning more money and the commodification of players. FIFA failed in their deregulated approach in 2015 and I hope that there will not be a repeat of this if they go ahead with hard caps on commission fees for agents. Perhaps improving education for agents, implementing a good licensing system and looking at other methods of increasing transparency, rather than hard caps, would go a substantial way to overcoming some of the problems FIFA wish to solve.

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