Finance:Globalization of the football transfer market

Gael Kakuta was suspended from football in 2009 for his illegal transfer from Chelsea F.C. to RC Lens.

The football transfer market has been affected by the increased freedom of movement, trade and communications between different countries since the 1990s. This globalization of the transfer market has impacted the way in which football clubs trade with one another and the relationship between players and their clubs. When professional leagues were first founded, there were significant restrictions preventing footballers from joining whomever they liked. These limitations were put in place by both the clubs these players were tied to, and the leagues in which they played. International labor movement regulations and the difficulties of scouting less developed nations also hindered the development of a liberalized transfer market.

History

Early years

From the late nineteenth century, when professional football leagues were first being established, to the late twentieth century, football clubs had a lot more control over players' futures in the transfer market. In England for example, in the early 1890s, the Football Association introduced a regulation stating that no professional player was allowed to play unless he registered annually with the FA, nor could he switch clubs without the FA's permission.

The Football League later brought into place a new rule insisting that any player who wanted to change clubs could only do so with the approval of their present club. It insisted that clubs could exclusively hold the registration of a player they had signed for as long as they wanted him, even if his contract had expired. A player could not sign for any other club until his current employer released his registration. The legality of this "retain-and-transfer system" was established in 1912 during the Kingaby case. Here Kingaby brought legal proceedings against his club Aston Villa for preventing him from playing. However, his counsel attacked the motives of the club, rather than the legality of the issue, and his case was dismissed.

There were also regulations preventing the signing of players from outside the club's locality. In England, at the end of the nineteenth century, clubs could sign players on professional contracts as long as they had either been born or had lived for two years within a six-mile radius of the ground. This limitation was quickly broadened to allow other English players to join, but many leagues limited the number of foreign nationals that could play for the club, and the work permit process could prove cumbersome. The Italian Football Federation had at one point banned players who were not eligible for the national team from playing in Italian leagues.

1990s-2010s

Numerous events led to the globalization of the transfer market and the liberalization of player movement. In the late eighties and nineties, there was an increase in the breakdown of international barriers to trade and movement. For example, the development of the European Community (later the European Union) and its belief in the freedom of movement of persons put pressure on European leagues to abolish their limits on non-indigenous players.

The Bosman ruling, named after former Belgian footballer Jean-Marc Bosman, changed the football transfer market. Bosman's contract with Belgian side RFC Liège had expired and he wanted to join French team Dunkirk, but the French side refused to pay the transfer fee that Liège were demanding. Bosman was forced to stay at Liège, who cut his wages by 75% due to him not playing. After a five-year legal battle, Bosman won his case on 15 December 1995 when the European Court of Justice ruled that players should legally be free to move when their contract expired. The ruling also allowed clubs to play as many non-indigenous players as they wanted.

Improvements in communications and Information Technology since the nineties have also contributed to the globalization of the transfer market. Clubs have access to huge online databases of players from all over the world, and so are no longer limited to buying players from countries closest to them. Clubs no longer have to send people to search continents for talent, as there are video clips of players based in these untapped markets on the internet.

Effect on clubs

The globalization of the transfer market has changed how clubs do business. For one, they now have a much larger market to buy from. For example, the number of non-Europeans playing in Europe's top five leagues has grown by 240% between the 1995/96 season and the 2005/06 season. Some see the addition of players from all over the globe to domestic leagues as beneficial to the game, arguing that allowing access to more talented players improves the overall standard of football. However, others say that clubs have become too focused on signing players from abroad and do not spend enough time developing local talent of the domestic leagues and that as a result, the national teams of the biggest importers of foreign talent suffer. Many governing bodies of football agree with this, and have since introduced quotas for local players. For example, the Union of European Football Associations state that the 25-man squad submitted by each club playing in the UEFA Champions League must have a minimum of eight locally trained players (players who have spent at least three years between the ages of fifteen and twenty-one with the club) included. This does not conflict with the Bosman Ruling, as players who originally come from other European countries can be considered to be locally trained.

How clubs interact with each other when signing players from different countries has also changed. Clubs have developed partnerships to allow close co-operation between the first teams, academies, training support and scouting projects. English Premier League club Chelsea F.C. announced the beginning of a 'special relationship' in 2010 with Eredivisie side Vitesse Arnhem, and have since loaned out nineteen players to the Dutch team. Clubs also form partnerships to scout areas that would otherwise be expensive to send talent-spotters to. For example, English club West Ham United have over thirty partner clubs in North America.

The amount clubs pay for players has also been affected. Due to the Bosman Ruling's abolition of a transfer fee as soon as the footballer's current playing contract expires, the number of remaining years has become important as clubs carry the risk of losing their players for free. As many domestic leagues have introduced 'home-grown' player quotas in response to increases of foreign players in the leagues, clubs realize that they can charge a premium in their home market for these local players.

Effect on players

Due to the increased freedom of movement, players have greater bargaining power in their negotiations with current clubs and with potential buyers. After the Bosman Ruling, footballers approaching the end of their contract could move anywhere for free. As a result, hopeful buyers had to make their contract offers more attractive than those offered by competing clubs, and so players could demand higher wages, performance bonuses, etc. Club wage bills have increased substantially since the ruling. In 2014, wages actually exceeded total revenue in the English second-division. Players also have greater job security, as they are offered longer contracts because clubs fear losing their players for free if they cannot successfully negotiate contract extensions.

There is increased pressure on players to prove themselves at an early age, as a result of clubs having a much larger range of players to choose from. If a club signs a teenager with a great reputation who then fails to make the first team, they would still have a higher resale value than a player approaching the end of their career. Teenagers all over the world are convinced to leave their families and homes by representatives of big clubs. Europe is the largest importer of young talent, as the fifteen leagues having imported the most young players in 2010 are all based in Europe. An example of a club pressuring a young player to join them is Chelsea F.C., who were found guilty by FIFA of inducing then 16-year-old Gael Kakuta to breach his contract with French club Lens in 2007. Kakuta was banned from playing for four months and was ordered to pay €780,000 in compensation.

There is also a wider variety of countries to choose from when players decide to leave their domestic league. There is free movement of labor within Europe for European players, and due to increased communications and ease of travel between countries, the visa processes for non-Europeans have become simplified also. Originally, the highest quality players moved to the most developed and respected leagues of Europe such as Spain, England, Germany and Italy. 62% of the 704 players participating in the 1998 World Cup were based in Europe. In recent years, rich clubs from the leagues of America, Russia and China have succeeded in convincing established players to join them over more renowned European clubs by offering attractive compensation packages.

Third party influence

Prior to the Bosman Ruling, the buying club and selling club were the only two parties that negotiated a player's transfer. As a result of the ruling, players received more bargaining power, and so too did their agents. Agents have become the 'middleman' of a transfer negotiation, and this increased influence has led to agents taking a larger cut of the transfer fee. To capitalize on this increased profit for negotiating a transfer, some agents have set up scouting networks to find unknown players with potential. These 'super-agents' have grown in influence over the years. For example, Mino Raiola earned £20 million of the world record £93 million fee Manchester United paid to Juventus for his client Paul Pogba in 2016.

Third-party ownership has emerged as an issue in the international transfer of players in recent years. It involves third-party sources, such as agents or businesses, owning all or part of a player's economic rights, so that the third party earns a portion of the player's transfer fees. The International Federation of Association Football banned the practice in May 2015, giving in to pressure from the players' union FIFPRO, who argued that it infringes on player rights, and that with the existence of TPO, clubs are no longer competitive entities but vehicles for financial speculators. Some have defended TPO, especially clubs in South America, who argue that it allows less developed clubs to sign players whose purchase would have been too expensive for the clubs to finance alone. In 2016, Javier Tebas, president of the Spanish La Liga, lobbied FIFA to overturn the ban and to allow regulated TPO.

Social issues

With a globalized labor market, leagues all over the world are becoming more multicultural, as club squads are made up of players from all over the world. This increased cultural diversity in teams has often caused discomfort and even aggravated xenophobic violence among fans. In 2012, Zenit St. Petersburg's largest fan club Landscrona sent an open letter to the team, demanding that the club refrain from signing black or homosexual players and that Zenit only sign "players from other brotherly Slav nations, such as Ukraine and Belarus." Clubs themselves have also been accused of discrimination. Danish newspaper BT claimed in 2015 that local club FC Midtjylland were underpaying their established African players compared to their market value and their European teammates.

A lack of transparency in the football economy has led to many clubs being sanctioned or placed under investigation by FIFA for their unethical treatment of players in the transfer process, particularly young players from third-world countries. German football lawyer Alexander Wild has described this issue as human trafficking in football: "It has occurred, and unfortunately still happens, that most socially deprived minors [are] unscrupulously exploited by agents and clubs who [want] to make big money." Since 2014, Spain's three biggest clubs, Barcelona, Real Madrid and Athletico Madrid have all received transfer bans and fines for their illegal registration of minors as youth players. FIFA has introduced controls in recent years to tackle this issue. For example, the international transfer of a player under the age of 18 can only proceed if the player's parents move to the country for non-football reasons.

Future impact

How the transfer market will be affected by any major international political development is widely discussed by football experts and journalists. For example, the United Kingdom decision to leave the European Union will have major ramifications on foreign players based in the UK and players considering moving to the UK. Already the effects are being felt, as foreign players currently in the UK are demanding higher salaries to compensate for the fall in value of the Pound Sterling that immediately followed the Brexit decision. In the long-term, European players hoping to come to the UK, as well as British players hoping to move abroad, could face work permit and visa issues as the UK would no longer be a part of Europe's free movement of labor.

The increased investment and popularity of non-European leagues due to global broadcasting distribution could see these countries become more attractive destinations for the world's best players than the current world leaders such as Britain, Germany and Spain. The Chinese Super League spent $300 million in the pre-season transfer window of January–February 2016 importing foreign talent. Former Shanghai SIPG manager Sven-Göran Eriksson believes that the proportion of the world's best players choosing China over Europe will continue to grow, saying that "The foreign stars want to come to China. They're curious to see what's happening, they know they will earn very good money, so it will be more and more of them."

See also

• Transfer
• Transfer market
• Bosman ruling
• Third-party ownership in association football
• Racism in association football