Why FIFA's planned regulation on agents looks set to backfire
  • Solutions
    Solutions
    Club
      CEO
      Sporting Director
      Head of Recruitment
      Loan Manager
    Agency
      Trusted Agent
  • Customers
    Customers
    Customers
      Customer stories
      Why users love us
    I have saved a lot of money this summer making 5 transfers using TransferRoom.
    Victor Orta
    Director of Football, Leeds United F.C.
  • Resources
    Resources
      TransferRoom Stories
      GBE Calculator
      Transfer Window Tracker
  • Company
    Company
      About us
      Careers

TransferRoom Stories

Best Practice
Trusted Agents
Why FIFA's planned regulation on agents looks set to backfire
by Dr. Erkut Sögüt

Dr. Erkut Sögüt, who represents Mesut Ozil, on why FIFA's push for a hard cap on agents' commissions will only serve to make the rich even richer.

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.
Dr. Erkut Sögüt
Founder, Football & Family

FIFA's clampdown

 

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, $653.9m 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 has proposed a set of reforms in agency regulation.

 

FIFA has 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:

  • An agent is entitled to a maximum of 3% of the player's gross salary when they are acting on behalf of the player.
  • 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.
  • 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.
  • 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.

 

The cap does not fit

 

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 $5m is 5.8%
  2. Currently, the average agent commission for transfers between $1m and $5m is 8.8%
  3. Currently, the average agent commission for transfers under $1m is 16.6%
  4. There were 3,558 transfers that used at least one intermediary in 2019; 148 of those transfers accounted for $430m worth of commission out of the total agency fees of $653.9m for the year
  5. That equates to 4.5% of transfers amounting to 65.7% of the total agency commissions

Therein 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 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:

  • The Premier League paid £272m to agents
  • The Championship paid £40m to agents
  • League 1 paid £3m to agents
  • League 2 paid £1m 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 percentage points 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 favor 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.

 

Legal hurdles in Europe

 

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 DFB, the German FA, 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 favor 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.

 

Make agents stakeholders in the game

 

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.

 

Dr. Sögüt is the Founding Partner of the Family & Football global agency and of Football Agent Institute, an education programme to help the next generation of football agents. He writes a weekly blog on the life and work of an agent, available here.

Are you ready to streamline your transfer operations?
Talk with an expert

Trusted by 500+ clubs

ROMA
ARSENAL
CITY
LIVERPOOL
JUVE
BARCA
BENFICA
LEIPZIG
INTER-MIAMI