European Pressure Speeds Ban on Soccer Player Ownership

A decision to ban investors from buying stakes in players in soccer’s $3.7 billion annual trading market was brought forward amid threats from European officials to introduce their own ban should the sport’s global body not act.

FIFA’s player status committee, the group studying the growing practice of third-party ownership, or TPO, was planning to make suggestions in December. But a ballot was pushed up, with members told to vote on a ban a day before last month’s quarterly meeting of the governing body’s decision-making executive board, said former FIFA Vice President Geoff Thompson and Rinaldo Martorelli, head of Brazil’s players union.

FIFA has come under pressure from European soccer governing body UEFA, which said it would unilaterally ban the practice.

“I would have liked more time to reflect but there was a lot of pressure from Europe to make a decision,” Martorelli said by phone. “They wanted to make a decision in one day. There was very strong pressure from Europe. I don’t know why.”

In TPO, investors buy rights to a player, betting that his transfer value will rise and they will make a profit when he is traded. That has led to concerns that teams could be pressured to move a player on to realize gains for firms.

Investors own stakes in as many as 1,100 players worth as much as 1.1 billion euros ($1.4 billion) in European soccer, or

5.7 percent of the regional transfer market, according to a report last year by KPMG LLP’s Spanish unit. All but two members of the 24-man player status committee voted in favor of outlawing TPO before it was ratified by the executive committee.

Immediately

“They thought was it was going to go in December but there was clear indication they wanted to deal with it immediately,” said Thompson, who’s also the head of a group looking at how to introduce the ban.

The decision came a month after European soccer head Michel Platini said he wasn’t going to challenge FIFA incumbent Sepp Blatter for the presidency next year, and instead focus on defending the interests of soccer in his 54-member region.

“I have been constantly warning for years that this practice -– which is becoming increasingly widespread -– is a danger to our sport,” Platini said after the ban was announced. “It threatens the integrity of our competitions, damages football’s image, poses a long-term threat to clubs’ finances and even raises questions about human dignity.”

FIFA Secretary General Jerome Valcke said it could take three or four years before regulations could come into force. That’s how long a typical player investment contract takes to mature.

Solution

“We have to find a solution and that’s going to be complicated,” Thompson said. “People are already in contract and clearly they have to see that contract through.”

FIFA officials, including legal affairs head Marco Villiger, said that tougher regulations rather than an outright ban was under consideration. Marcos Motta, a Rio de Janeiro-based lawyer who is part of Thompson’s TPO study group, said he was also taken by surprise by FIFA’s decision. Motta said he was advocating greater regulation and transparency, not a ban.

The investment technique began in South America in the 1990s and spread to Europe when banks reined in lending to cash-strapped clubs after the 2007 financial crisis. A ban will hurt clubs in Brazil, Argentina and especially in Uruguay, where the funds have invested in the majority of top-division players. Martorelli said he voted for a ban even though he would have preferred to have more time to make a decision.

English soccer’s Premier League has been among the biggest critics of third party ownership, which has been banned in the country since 2008. That’s when it was revealed that an outside company controlled two Argentine players, Carlos Tevez and Javier Mascherano, who were transferred to London-based West Ham.

“I would like regulation so that everything is done transparently and cleanly,” Martorelli said. “The money that is invested in English football isn’t any more clean than the money invested elsewhere. Let’s not be hypocrites.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE