Does European Football need a transfer market? Stefan Kesenne Univ. of Antwerp and KULeuven

European Court of Justice, 1995 the Bosman-verdict  Abolition of the current transfer system: Only end-of-contract players are free to move to another team without a transfer fee. Only end-of-contract players are free to move to another team without a transfer fee.  Abolition of the 3+2 –rule A team can field an unrestricted number of foreign European players.

hasn’t changed much in European football, because clubs reacted by lengthening the contract duration (up to max 5 years), and continued to trade under- contract players for ever higher transfer fees. The abolition of the transfer system hasn’t changed much in European football, because clubs reacted by lengthening the contract duration (up to max 5 years), and continued to trade under- contract players for ever higher transfer fees. - between 1996 and 2011, the number of tranfers has more than tripled, from 5700 to more than between 1996 and 2011, annual transfer spending has increased from 400 million euro to more than 3 billion euro, that’s a rise of more than 700% (octupled). - less than 2 % of the money from transfer fees went to the smaller clubs.

Recent European Commission study has stated that: Football transfers need overhaul to keep game competitive by:  Capping transfer fees  A fair play levy on transfer fees  a limit to the number of players per club  Regulation of the loan transfer system  Support for the implementation of UEFA’s financial fair play

 In my opinion, some of these EC proposals are steps in the right direction, but they don’t go far enough to restore competition in European football. Even with UEFA’s FFP, that is: without sugar daddies, the competitive imbalance in European football will not disappear, but it might change the competitve balance within national championships (See recent study by Thomas Peeters and Stefan Szymanski, 2013).  In 1995, the European court and the Bosman lawyers only concentrated on the abolition of the transfer system for end-of- contract players, because J-M. Bosman was at the end of his contract with FC de Liège, but also because it is pure juridicul nonsense that you are not free at the end of your contract.  Maybe, the lawyers of Bosman should have taken their case further and abolish the tranfer market completely. I plan to contact Luc Misson and Jean-Louis Dupont again to talk about the next step.

 Originally, the transfer system was created to guarantee more competitive balance in a league, and to hold down player salaries.  But that is exactly what has not happened in European football.  The current system with its skyrockening player salaries and its transfer payments, only between the richest clubs, has become a closed circuit which is leading European football towards ‘de facto’ closed leagues, with increasing competitive imbalance in both national and European competitions.  Consider the transfer fee of 94 million euro for Ronaldo, paid by Real Madrid to Mann U., what is it compensating? A one-way plane ticket between London to Madrid cannot be that expensive.  What the EU study says is that we need a transfer system which contributes to the development of all clubs and young players.  Does European football needs a transfer market at all? It does not exist in any other industry of the economy, why in sports?

Everybody agrees that compensation for youth training is important  Leagues should create a compensation fund for youth training, that is financed by a contribution of each team as a percentage of its budget.  The money should be distributed by the league among the teams based on the quantity, and the quality, of their youth training, regardless the fact that the player stays or leaves the team.  So training compensation and the transfer of a player should disconnected. Each player can move at the end of each season, without a transfer payment. Transfers during the season should be forbidden.  However, contracts should still be respected and honoured. A one-sided break of contract should be fined with an amount that is fixed by the league or the court, in order to prevent that clubs would turn it into a disguised transfer fee.

Modelling the compensation system Assume an n-club league: Each club receives a share s i from the fund, depending on its youth training efforts (quantity and quality) Each club contributes µR i to the Youth fund with

, If each club puts the same effort in youth training, so, each club receives the same amount of money from the fund, that is:, and In this particular case, the after-sharing budgets of small clubs will be higher because they receive more money from the fund than they have contributed. Before and After Sharing In general, the budgets of small and large clubs, before and after the youth compensation, will be the same if their share of effort in youth training will be the same as their budget share, that is if: So, a club will see its budget go up if

So, in win-maximization Leagues (such as the European football leagues), this youth training compensation system can improve the competitive balance If in a league, where all teams are win maximizers, the share of effort that small clubs put in youth training is larger than their low budget share, we can derive that starting from: So, if the EU and the football leagues are serious regarding the importance of youth training compensating, they should make µ large enough, and simply abolish the transfer market.