Transfer market suffers from a lack of transparency

A new report commissioned by the European Commission analyses the current transfer market in terms of legal framework and economy and presents a line of policy recommendations incorporating developments over the past 5 years.

The report builds on a similar report done in 2013 and analyses developments in the market since then. The economy of the football market, especially the European, has seen a significant rise in recent years and the report argues that while a number of measures have been implemented to regulate the huge money flow, the transfer market could still benefit from improved transparency, monitoring, solidarity and regulation in a number of areas.

The European football market totaled €24.6 billion in revenues for the 2015/2016 season, the report, released on 23 March, says. Its main focus is on the European market because this is by far the largest, led by the leagues of England, Spain, France, Italy and France, also known as ‘the big five’.

In 2016, 82.1% of international transfer fees was spent by UEFA clubs. In 2017, transfers for the ‘big five leagues’ alone accounted for €5.9 billion. This number is up from €2 billion in 2012.

Another number highlighting the expanding economy in football is a surge in broadcasting rights revenues which have more than doubled over the past five years for the big five leagues, from €4.238 billion in the 2011/2012 season to €8.518 billion in 2017/2018.

The gap increases
Overall, the report points to an increasing gap in terms of economic and sporting performances, not only between top clubs in the big leagues but also between the different leagues, as well as a “concentration of resources”, thus creating decreasing competitive balance.

The introduction of Financial Fair Play (FFP) was meant to stop overspending by football clubs and has contributed to more financial stability, the report finds, but FFP has not been able to address the competitive balance between the clubs and leagues. The report further argues that the ban on Third Party Ownership (TPO), while hopefully leading to more “ethically acceptable” investments, could worsen current imbalances in the system, and loopholes like ‘bridge transfer’ should be prevented in future adjustments.

The report also looks into the regulations existing on the transfer of young players, which it finds “addresses the main problems affecting the protection and development of minors to some extent”. There is, however, still a need for further harmonising and enforcing the regulations globally, the report concludes.

An area that has not developed since the release of the last report, is ‘training compensation and solidarity mechanics’ although this is an area that is directly affected by the lack of transparency on the transfer market. The report suggests the establishment of a ‘Global Clearing House’ to oversee an enforcement the measures already in place.

Summing up the developments of the transfer market over the past five years, the report lists eight policy recommendations to work on in future refoms:

1. "Better exploit the existing social dialogue process on professional football to explicitly address issues linked to transfer of players;
2. Recast of the FIFA Regulations on Working with Intermediaries;
3. Improve transparency tools in the football market (TMS database, Football Associations reports, Global Clearing House);
4. Increase the solidarity mechanism percentage and strengthen its enforcement;
5. Address the issue of bridge transfers by strengthening investigation tools monitoring club ownerships;
6. Regulate loan transfers by limiting the number of loans per beneficiary and lending clubs;
7. Improve the rules on minors and the condition of entry for young players;
8. Establish a ‘luxury tax’ on transfer fees beyond a certain transfer fee amount"

The study on the developments in the transfer market was commissioned by the Directorate-General for Education, Youth, Sport and Culture (DG EAC) of the European Commission and undertaken by KEA, a research and advisory company based in Brussels. The research draws on and updates the findings of a previous study on the topic, published in 2013.