THE FAILURE OF THE CJEU AND THE COMMISSION TO SUPPORT FOOTBALL CONSUMERS, AND THE NEED FOR A EUROPEAN SPORTS ACT

1. INTRODUCTION

In most national and European men’s club professional football competitions, the competitive balance has decreased over the years. Matches between large and small clubs have become more predictable, and the number of clubs capable of winning prestigious prizes, such as a national title or the European Cup, has decreased. This reduces the satisfaction of football consumers (also referred to as football fans), and consequently decreases overall welfare.1

Too little competitive balance can, in principle, be a reason to change the league system so that strong European clubs play more games against other strong clubs. One of the options here is a European Super League.2 However, there have been massive fan protests against the announcement of a (closed) Super League in 2021.3 This raises the question of whether a Super League can truly benefit consumers. It has been argued that the answer can be as follows: if there are no further decreases in competitive balance, the traditional league system will probably generate more consumer satisfaction than a system with a Super League, even in the case of an open Super League. However, if competitive balance in the traditional system continues to decrease, the opposite may hold.4

This paper examines the role of the European Union (EU) in the fields of competitive balance and the league system. It starts by discussing three crucial rulings of the Court of Justice of the European Union (CJEU). Two of them concern the transfer system. It is argued that these two rulings are legally flawed and have negatively impacted small clubs and football consumers. The third ruling, the European Super League ruling, was simply a response to the narrow questions posed by the complainant, the European Super League Company. As a result, it has also harmed small clubs and football fans. It is then argued that the European Commission could have helped small clubs and football fans by applying competition law to football consumer markets; however, it has been inactive in this regard. It would be beneficial for the Commission to become more proactive in the near future. In the long run, a European Sports Act could further address the issues in the football sector mentioned above, while also enhancing the broader sports ecosystem.

2. THE RULINGS ON THE TRANSFER SYSTEM

This section discusses the two main rulings of the CJEU on the transfer system: the 1995 Bosman ruling and the 2024 Diarra ruling. We start by addressing how these rulings have affected, or will impact, the competitive balance. Before these rulings, clubs could demand any transfer fee for all their players, including those whose contracts had expired. This system improved competitive balance for two reasons. First, the transfer fee payments led, on balance, to a redistribution of income from larger to smaller clubs. This enabled smaller clubs to hire better players.5 Second, in principle, smaller clubs could retain their best talents for as long as they wanted (unless the player left professional football). For instance, Ajax Amsterdam, a relatively small club in Europe, could retain its homegrown talent, Johan Cruijff, until he was 26 years old. This enabled the club to win the European Cup three times from 1971 to 1973. In 1973, Ajax sold Cruijff to Barcelona for a record transfer fee, which allowed Ajax to improve their future squads after his departure.

In 1995, the Bosman ruling abolished transfer fees for out-of-contract players, allowing them to move freely to any club. Apart from eliminating transfer fees for out-of-contract players, the ruling also reduced transfer fees for under-contract players (compared to what would have occurred without the ruling), by creating pressure to sell players before their contracts expired. Indeed, it could be lucrative to sell players more than a year before their contracts ended, as the number of remaining contract years had a positive effect on the size of transfer fees.6 Thus, Bosman reduced the redistribution of revenue among clubs. In addition, smaller clubs could no longer keep their best talents for extended periods. These factors contributed to the ruling reducing competitive balance. Ajax can serve as an illustration again. In May 1995, Ajax won the European Cup for the fourth time in history, with many young, home-grown top talents. In December 1995, the Bosman ruling was implemented. Soon after, many of Ajax's promising young talents departed for clubs that offered higher financial rewards. Ajax never won the European Cup again.

In 2024, the CJEU issued the Diarra ruling. Lassana Diarra had left his club, Lokomotiv Moscow, while still under contract. The FIFA transfer rules restricted him from finding a new club, and he contested the restrictions in court. Following proceedings in lower courts, the CJEU ruled in his favour.7 The effects of Diarra on other under-contract players are not yet apparent, but their transfer fees are expected to be reduced. This will further reduce competitive balance.8

To sum up, Bosman has reduced competitive balance, and Diarra is likely to do the same. Since less competitive balance leads to lower consumer satisfaction (see Section 1), this means Bosman has harmed, and Diarra is likely to harm, consumer satisfaction and, in relation to this, (total) welfare. This might have been acceptable if the rulings had been legally correct.

However, both rulings are flawed. Here, we discuss two legal shortcomings.9 The first weakness is that the rulings have neglected competition in consumer markets. To explain this, let me begin by stating that competitive balance has declined over the years. This means, by definition, that the number of clubs that can win prestigious prizes has declined. Since many consumers like to watch, or even become fans of clubs that can win such prizes, a decline in the number of clubs that can win such prizes reduces the competition in consumer markets. This implies that the decrease in competitive balance has reduced consumer market competition.

This might not have been a big problem if the European consumer market were the only market in football, as even at present, there are still quite a few clubs that could win the highest European title one day. However, many consumers (also) like to watch, or become a fan of, a club from their own country. Thus, consumer markets in football are national markets to a large extent. Bayern Munich, for instance, is strongly competing with other German clubs for fans, making the German consumer market an essential market for the club. In this market, competition has been significantly reduced, with only a few German clubs currently capable of winning the German title or the European Cup. In many other countries, the number of clubs that can win prestigious prizes, or in other words, the number of top football suppliers, has also decreased. This has increased the market power of the remaining domestic suppliers of top football, enabling them to charge higher prices.

As argued above, Bosman has contributed to the reduction of competitive balance, and Diarra is likely to do the same. This implies that the rulings have reduced, or will likely reduce, competition in national consumer markets, leading to higher consumer prices. Unfortunately, the CJEU neglected this point in Bosman and Diarra.

So, what was the CJEU's argument? It argued that the transfer system violated the free movement law because it hampered the free movement of workers. Additionally, the transfer system violated competition law by frustrating competition among clubs for players.10 This argument is not unreasonable by itself. However, the CJEU should have also considered the transfer system's positive impact on competition in consumer markets and weighed this against the adverse effects on the free movement of workers and competition in the labour market. Since it failed to do so, their rulings are flawed.

In the Bosman case, the CJEU also used another argument. This concerned the possibility of making an exception to the free movement law for reasons of public interest, particularly the need for competitive balance. According to the CJEU, this need could justify granting an exception, provided the condition of proportionality was met. However, the transfer system did not meet this condition because alternative measures were available to improve competitive balance without harming the free movement of workers.

Now, it is clear that such alternative measures exist. For instance, the broadcasting revenues could be shared more equally among clubs. Thus, the CJEU’s argument is sensible at first sight, at least. In relation to this, there could be a counterargument to the point I made earlier. It would go as follows: even if the transfer system improves competitive balance and, consequently, competition in consumer markets, there are alternative measures to improve competitive balance and consumer market competition that do not hinder free movement (or the competition among clubs for players). Therefore, it is preferable to use one or more alternative measures, as they improve competitive balance and consumer market competition without harming free movement (or the competition among clubs for players).

However, there is a problem with this counterargument, as well as with the CJEU's argument in Bosman: in practice, the football sector does not use alternative measures to a sufficient extent. The reason is that the large clubs oppose serious measures for improving competitive balance, as they want to win most of their matches themselves. Given their power (see also the next section), this means that serious measures are not feasible for UEFA and the national football associations. Unfortunately, the CJEU has neglected this problem. This is remarkable, since court rulings are supposed to concern reality and take into account what is feasible in practice.

An organisation that has the power to oppose the big clubs is the EU. Thus, it would have been sensible if, in 1995, the CJEU had asked the European Commission to regulate the football sector, and more specifically, to ensure that severe measures were introduced to improve competitive balance and competition in football consumer markets. If the Commission had complied with such a request, my criticism of the Bosman and Diarra rulings would have been rendered moot. However, nothing of this kind has happened. Therefore, the conclusion must be that the two rulings are fundamentally flawed.

This also means that the EU as a whole has failed to protect competition in consumer markets. Correcting this failure through new legislation would be a matter of justice. However, this will be discussed later in this paper. For now, the focus remains on enforcing existing laws.

3. THE EUROPEAN SUPER LEAGUE RULING

In 2023, the CJEU ruled on the European Super League in response to a complaint from the European Super League Company (ESLC). The ruling stated that UEFA protected its monopoly in the market for organising club competitions by raising obstacles for other competition organisers, such as ESCL, in a way that violated competition law.11 The ruling will now reduce these obstacles, making it easier to start a Super League.

As noted by the CJEU, the ruling was only a response to a complaint concerning the market for organising competitions, and did not comment on the “compatibility of the Super League project itself with . . . the TFEU Treaty.”12 In my view, the CJEU might have ruled less favourably for the Super League if other complaints had been brought to court, such as the complaint that the ESLC's Super League reduced competition in national consumer markets, thereby increasing consumer prices. More generally, in my view, any Super League would violate competition law because it reduces consumer market competition, and mere proposals for a Super League can also violate this law. This perspective will be further explained bellow, starting with a simple example.

Consider a Super League consisting of 40 clubs without relegation. In such a closed league, there would be several clubs without domestic rivals (e.g., a single club from Denmark). These clubs would then have a monopoly on top football in their domestic consumer market. In other words, the Super League would reduce the competition there. However, Art. 101(1) of the TFEU prohibits “all agreements between undertakings, decisions by associations of undertakings and concerted practices which . . . have as their object or effect the prevention, restriction or distortion of competition.”13 A Super League is based on an agreement among clubs, and professional football clubs are considered undertakings under the law. Therefore, the closed Super League mentioned above violates competition law.

Over the years, many different proposals for a Super League have been put forward.14 In this context, it can be argued that any Super League would violate competition law. The reason is that any Super League reduces the competition in national consumer markets, as it reduces the number of domestic clubs that can offer European top football (by regularly participating in the Super League, the only European top competition). This enables Super League clubs to increase domestic prices, thereby raising revenues and profits. Thus, every Super League is based on an agreement among clubs that aims to reduce competition in consumer markets, violating competition law.15

Let us now discuss the proposals for a Super League, as opposed to the realisation of such a league. All proposals for a Super League over the last 30 years have posed a threat to UEFA competitions. In response, UEFA has been favoring big clubs most over the years.16 For instance, UEFA allocates a large part of the Champions League's revenues to them, whereas a more equitable distribution of these funds would enable smaller clubs to strengthen their teams and, consequently, improve overall competitive balance.17 The current format of UEFA competitions also helps larger clubs the most. For instance, UEFA altered the Champions League in 2024 in a way that will likely increase the revenues for these clubs, allowing them to further reinforce their teams.18

The above implies that the proposals for a Super League have contributed to a decrease in competitive balance, resulting in reduced competition in consumer markets. Big clubs have been actively supporting these proposals. Thus, the proposals can be regarded as agreements (or concerted practices) among big clubs that aim to reduce market competition, thereby violating competition law.

As noted above, the CJEU's 2023 Super League ruling has made it easier to establish a Super League. This will benefit larger clubs by allowing them to make more credible Super League threats, forcing UEFA to accommodate them further. This will further decrease competitive balance and, therefore, lower consumer satisfaction. Additionally, it will reduce competition in consumer markets, resulting in higher consumer prices. Both the reduced satisfaction and the increase in prices (which cause lower consumption levels) will negatively impact overall welfare.

In the long run, the decrease in competitive balance may reduce the attractiveness of the current league system to the point where a Super League, which can offer higher competitive balance due to its smaller number of participants, becomes a more appealing option for (most) consumers. Nevertheless, in that case, a league system with a Super League would likely still provide consumers with less satisfaction than the current system with the present (or recent) levels of competitive balance (see Section 1). At the same time, there would be less competition in consumer markets and higher consumer prices, which would also harm welfare. Such a situation would then be partly the result of the Super League ruling.

In short, the fact that the ruling has only addressed the questions brought to court by the complainant has harmed competition in consumer markets and (total) welfare.

4. THE EUROPEAN COMMISSION AND THE ENFORCEMENT OF COMPETITION LAW

The European Commission also has a responsibility for enforcing competition law. It can do so in response to specific complaints, but unlike the CJEU, it can also act on its own initiative. Thus, it could have investigated the Super League and the proposals (or threats) thereof, which, as argued above, violate competition law. Unfortunately, the Commission has done little in this field thus far.

Given the argument in the previous section, however, it would be reasonable for the Commission to take action now. It could examine whether all or certain types of Super Leagues violate competition law. If, as previously argued, the answer is affirmative, it should declare (certain) Super Leagues illegal.

Proposals for Super Leagues, which are used to induce UEFA to favour the largest clubs, could also be deemed illegal. This would reduce the power of these clubs within UEFA, allowing for more support to be given to smaller clubs and improving competitive balance and consumer market competition. It would be reasonable for UEFA to attempt to reverse all reductions in competitive balance and market competition that have resulted from Super League proposals over the past 30 years. While it may be difficult to determine precisely how much more competitive balance is needed for such full compensation, UEFA can still head in the right direction.

In the member meetings of UEFA and national football associations, the representatives of the football associations of small countries and relatively small football clubs hold the majority of the votes. This means that if large clubs from big countries can no longer threaten to leave the UEFA competitions, democratic decision-making could lead to even more reductions in competitive balance than suggested above. Indeed, the principle of ‘one member, one vote,’ on which European sports are traditionally based, promotes competitive balance and consumer market competition. All in all, existing EU law allows, or even obliges, the European Commission to respond to Super Leagues and proposals thereof in a way that benefits consumer market competition, football consumers, small clubs, and welfare.

Regarding the transfer system, the powers of the European Commission are more limited. It cannot undo the Bosman and Diarra rulings, even though they reduce competition in consumer markets, harm welfare, and are legally flawed (as discussed earlier). This raises the question of how the EU can mitigate the adverse effects of these two rulings on competition in consumer markets and welfare. Could new legislation be helpful here? A broader perspective is needed to address this issue.

5. A EUROPEAN SPORTS ACT

Sports governing bodies (SGBs) traditionally have a lot of autonomy in organising their sports. However, their independence is constrained by the law. For instance, the CJEU has compelled the SGBs to modify certain aspects of their policies by applying EU competition and free movement law in several rulings, including those discussed above. Overall, however, the EU has had a limited impact on sport. The EU “rules only what may not be done, not what shall be done, and it does so only when a particular dispute happens to spill over to generate litigation.”19

In earlier times, when SGBs were primarily responsible for setting the rules of the games, their autonomy was not a serious problem. At present, however, sports are commercialised, stakeholders' interests are considerable, and SGBs have multiple tasks. In this context, some serious issues have emerged. First, the governance of SGBs is far from ideal. For instance, there is often inadequate representation of all stakeholders and insufficient transparency, and quite a few scandals have occurred. Second, there are issues with the sports themselves. In football, for instance, competitive balance is decreasing, the open league system is under threat, and the congested match calendar poses a risk to players.20

In this context, it has been argued that the role of the EU should no longer be solely reactive; instead, it should utilise the legislative powers conferred upon it by the TFEU, particularly Article 114 TFEU, to enact new legislation in the form of a European Sports Act.21 In addition to this argument, it can be noted here that Article 114 aims to enhance the functioning of the internal market, which encompasses consumer markets. Thus, the decrease in competition in football consumer markets and the need for improved consumer protection may provide further support for the argument that Article 114 can serve as the legal basis for a Sports Act.

A European Sports Act could impose serious governance requirements on the SGBs. This could concern the decision-making, the representation of all stakeholders (including consumers and athletes), and patterns of accountability, among other things.22 The present paper suggests that a key goal could be to enhance the democracy of football associations in a way that prevents a minority of members, comprising associations from large countries or large clubs, from dominating the majority.

The new legislation could also impose more substantive requirements. Several authors have suggested that the aim of the legislation could be to protect the traditional ‘European Sports Model’. This model features a pyramidal structure, an open system of promotion and relegation, competitive balance, solidarity, and a grassroots approach, among other key elements.23 More recently, however, it has been emphasised that this model is not perfect, especially because the governance model of traditional SGBs is weak in addressing some of the present-day problems. Therefore, it is better to base the new legislation on a ‘European Vision of Sport,’ which can still be (strongly) inspired by the European Sports Model. Based on this vision, a recent paper has presented a concrete proposal for a European Sports Act, suggesting that further discussion is needed.24 The present paper proposes that such a discussion should pay serious attention to the question of which rules for improving competitive balance and competition in consumer markets should be included in, or stimulated by, the Sports Act.

A crucial question, however, is whether the EU is willing to take action. The Council of the European Union, the representatives of the Member States, the European Commission, and the European Parliament have all demonstrated good intentions.25 However, no concrete action has been taken yet. Indeed, whether the EU is genuinely willing to help the sports seriously remains an open question. This paper has focused on one sport only, demonstrating that, to date, the EU has seriously harmed the interests of small football clubs and football consumers. This provides an additional reason for the EU to take serious action soon.

6. CONCLUSION

The CJEU and the Commission have not adequately protected competition in football consumer markets and the related interests of small clubs and football consumers. This failure can be partly rectified by the Commission applying existing competition law more rigorously in the near future. In the long term, a new European Sports Act can further address the problems of football discussed in this paper, while also enhancing the broader sports ecosystem.

Bibliography

https://blogs.lse.ac.uk/europpblog/2024/10/08/the-diarra-ruling-is-a-flawed-decision-and-football-fans-will-pay-the-greatest-price/2.