MLS Free Agency: Geoff Cameron Case Study

Last week, FC Cincinnati announced that former USMNT defender Geoff Cameron had signed with the club.[1] With the changes in MLS’s Free Agency[2] eligibility rules, it’s possible Cincinnati availed itself of the signing mechanism to bring on Cameron, which creates a great opportunity for us to break down the new MLS Free Agency rules, and how they affect eligible players’ return to MLS.   

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Transfer Analysis: Daryl Dike, Purchase Options, and Player Valuations

Daryl Dike has had an incredible professional career.  One that has lasted less than a year and a half.  After being drafted 5th overall in the 2020 MLS SuperDraft, Dike had a standout MLS performance for Orlando City SC in his first professional season.  This rookie performance caught the eyes of Championship club Barnsley who offered him a loan in February of 2021.   Scoring nine goals since February, and averaging a goal every 129 minutes in the Championship so far, Dike is now one of the top strikers in the USMNT player pool, has had his loan extended until the end of the championship season, and is reportedly turning heads at Premier League clubs like Everton and Leeds.

Reports have hinted that Barnsley and Orlando agreed on a $20M purchase option, with a 20% sell-on fee. [1]  At the time, many considered such an impossible value for Dike to reach.[2]  Now, with the way he is playing in the championship, that number is starting to sound more realistic.    

With Dike shining in the Championship, it seems time to talk about his purchase option, assessing his value, and how it might affect his move up the football ladder.  

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MLS Salary Cap 101

Major League Soccer (“MLS”) has two distinct, and intertwined, defining features that set it apart from the rest of global soccer: Its single-entity structure, and its salary cap.

While standard in most major American sports leagues, salary caps are near-nonexistent in soccer elsewhere in the world.  Earlier this year (2021), an arbitration panel threw out the English Football League’s attempt to establish a salary cap for League 1 and League 2 (the third and fourth tier of professional soccer in England), after the English player’s union (the PFA) challenged the regime.[1]

One of the central philosophies behind MLS’s American-style salary cap is to maintain competitive balance amongst its clubs.[2]  This balance, to MLS, is fundamental to its growth strategy for North American soccer, and the league writ large. 

To MLS, parity reduces the predictability of competitive results, which creates a more interesting product for prospective fans and neutrals, which in return will lead to growth in popularity of the sport and the league —or so the theory goes.

For MLS clubs, however, competitive dominance -not balance- is top of mind.  The fundamental basis of the parity theory is that it creates a potential for all teams to win.  Essentially the draw for fans is the hope that there is a possibility in every matchthat their team will win.  So, a club on an individual basis will grow interest, fan support, market share, and revenue faster if they increase their likelihood of winningby become consistent winners.

This makes sense.  The biggest clubs and teams in the world are the ones that have the biggest histories of winning.  Real Madrid, Liverpool, the Yankees, the Lakers, all built their global fanbases with the contents of their trophy cabinets, not the fact that their matches and games had extremely unpredictable outcomes.

Therefore, soccer clubs, including those in MLS, should fight to maintain competitive dominance, not balance to grow their fanbase and improve their bottom line.

This is the first piece in a series discussing strategies MLS clubs can leverage to break the league’s competitive balance and create a model for sustained sporting (and therefore, hopefully, commercial) success in MLS.

As the 2021 MLS season kicks off this weekend, it makes the most sense to start by breaking down MLS’s Salary cap in straight forward terms, to better understand the constraints by which MLS Clubs must follow as they build their rosters.[3] 

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A dispute over training compensation in US Soccer: Youth Soccer Clubs v USSF, MLS & MLSPU

1Several American Youth Soccer Clubs sued the MLS Players’ Union (MLSPU) and three former and current MLS players in the Eastern District of Texas federal court in July 2016 to enforce the training compensation and solidarity payment provisions[3], contained in FIFA Regulations on the Status and Transfer of Players (RSTP). The complaint[4] was brought in United States District Court of the Eastern District of Texas by Youth Soccer clubs, Dallas Texans Soccer Club, Crossfire Foundation, Inc., and Shocker’s FC Chicago LLC (together, the Youth Clubs). These clubs were training clubs for Clint Dempsey, DeAndre Yedlin, and Michael Bradley respectively. The Youth clubs name the MLS Players’ Union (MLSPU) Dempsey, Yedlin, Bradley, and “all those similarly situated” as defendants in their complaint. On March 29, 2017, the Court dismissed the case on jurisdictional grounds.

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Current MLS Agent Regulations Explained

Agents negotiating player contracts with MLS franchises faced huge changes in 2015. FIFA promulgated new regulations governing agents negotiating player employment contracts, which came into force on 1 April 2015. FIFA now defines agents representing clubs or players in negotiations related to player employment contracts (either individuals or organizations) as “intermediaries.” As a result, the United States Soccer Federation released a memorandum outlining its intermediary regulations effective April 1, 2015. Likewise, Major League Soccer and the MLS Players Association agreed to terms of a new collective bargaining agreement this past summer, which defines the scope and terms by which agents may operate when negotiating player employee agreements with MLS franchises.

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THE LEGALITY OF DAILY FANTASY SPORTS BETTING IN THE US

Since 1919, when the then-heavily favored Chicago White Sox intentionally lost the World Series, sport gambling and sport betting have been at the forefront of the national sports conversation.1The event ultimate led to the Professional and Amateur Sports Protection Act of 1992 (the “Bradley Act”),2 which effectively bans sports gambling in the United States.

However, using an exemption in the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA),3 numerous businesses have created a legal alternative for American sports gambling in the form of daily fantasy sports.

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Periscope: An Old Problem in a New Medium

Periscope and Meerkat: the New Frontier in Sports Piracy

Two apps are pushing into a new realm of social media. Periscope and Meerkat both allow individuals to stream video and audio of current events in real time to followers. It’s easy to see how this may become a problem for sports broadcasters, teams, and event organizers.

The problem of live broadcasts and rebroadcasts of live sports events is not new. However, these apps have the potential to create dynamic fan interactions with sporting events. Sport organizers, broadcasters, teams, and leagues balance their interests of protecting their rights, while still allowing this increase in fan engagement through the apps.

The Apps:

Periscope, and Meerkat allow users to live-stream video and audio to followers on their own channel. This allows users to display live events as they happen to anyone interested. These apps have garnered attention from major investors, Periscope being owned by social media giant Twitter. Periscope and Meercat essentially offer the same service, although Periscope allows individuals to broadcast to any user, Market users’ broadcasts are limited to twitter followers, or people viewing their twitter feed.

Periscope made the news when the season premier of Game of Thrones was live broadcasted on the app by numerous users, forcing Periscope to issue a number of takedown notices from HBO.[1] More recently, rampant piracy of the Mayweather/ Pacquiao fight, cause over a hundred takedown notices to be posted between the two apps.[2]

These events should, and most likely have, raised the antennas of sports broadcasters, leagues, and major event organizers. This will happen for major sporting events, and organizers, broadcasters, and leagues need to establish a plan to deal with broadcasts.

The Broadcast

In the United States, sporting event broadcasts are protected by 17 U.S.C. §102.[3]. Jurisdictions differ about whether the underlying sporting events are considered “news” or protected creative works, but most take the stance that there is a modicum of creativity in the broadcast themselves that a re-broadcast can be considered a misappropriation of the broadcast’s copyright.

Even if the event is protected under copyright law, it can be re-appropriated if use of the copyrighted work meets one of the requirements for a “fair use” exemption. For example, if someone was live-broadcasting their child’s first steps with the super bowl in the background. Since the super bowl is merely an element of the underlying video, and not the purpose of recording that video, the “rebroadcast” of the event may not not infringe on the NFL’s copyright. The same could be said for reaction videos of sporting events, or even short clips of sports broadcasts that users post to show what they’re currently up to.

The Live Event:

Live sports event tickets constitute a revocable license to attend the event subject to certain conditions.[4] One of those conditions typically bars attendees of events from recording and/or broadcasting the event. If an attendee is caught recording or broadcasting the event, the event organizer can normally eject that attendee from the event.

Balancing Interests

 

Sports event organizers and broadcasters face an old problem in a new medium. The use of these broadcasting apps can both generate interest in their products and hijack the distribution of their product. Current ticket licenses may conflict with a push for fans to broadcast their experiences at the games. Likewise, current Broadcast license language may cause a similar problem. However, sports organizations have been trying to engage fans to use Periscope to both watch content generated by the organizations, and to generate content surrounding their event or brand.[5]

Organizers and broadcasters need to take into account their current policies, how they intend on using Periscope and Meerkat for fan engagement, and how they intend to protect their product. Promoting use of these live-stream apps may undermine ticket license restrictions and violate broadcast agreements. Without a nuanced approach, and understanding of the social media space, leagues, teams, and organizers could face blowback from fans receiving takedown notices of streams, or event ejections for seemingly innocent behavior.

[1] http://www.dailymail.co.uk/sciencetech/article-3044211/Periscope-s-piracy-problems-HBO-issues-takedown-notices-Twitter-s-app-used-broadcast-Game-Thrones.html

[2] http://www.theverge.com/2015/5/8/8565983/periscope-meerkat-piracy-boxing-mayweather-pacquiao

[3] Per § 102 commentary, “broadcasts” are creative works “fixed” in a tangible medium and therefore protectable. See, “Notes” 17 U.S.C. § 102, https://www.law.cornell.edu/uscode/text/17/102

[4] See, Dan Fitzgerald, “Can They Take My Tickets? The Legal Rights of Sports Teams and Fans” at http://ctsportslaw.com/2008/10/22/can-they-take-my-tickets-the-legal-rights-of-sports-teams-and-fans/

[5] See, Penguins On Periscope, https://www.periscope.tv/w/VxRNWDExNTQ4N3w1NjA4MDY5RHCzKinlTeQ8uGcIc0BC1tmQk9lRFVZgufJf-Spo3_8=

The 2015 MLS CBA, Bosman, and how European Law Affects Free Agency in American Soccer

Major League Soccer and the MLS Players Association are on the precipice of a break down in Collective Bargaining Agreement negotiations. One of the major sticking points in the negotiation is the issue of free agency in Major League Soccer. Soccer in the European Union faced similar restrictions over movement of players after the expiration of their contract, which was resolved in the Bosman ruling two decades ago. Through CAS Jurisprudence, the decision in Bosman may render the free agency debate in Major League Soccer moot.

The Bosman Ruling:

In the landmark Bosman ruling, the European Court of Justice held that that rules requiring a payment of a negotiated transfer fee for the transfer of a player after the expiration of his employment agreement was an illegal restriction on a Player’s fundamental right to freedom of movement. [1] Specifically, the ECJ found that said rules “are likely to restrict the freedom of movement of players who wish to pursue their activity in another Member State by preventing or deterring them from leaving the clubs to which they belong even after the expiry of their contracts of employment with those clubs. “[2]

Additionally the court held that “since [the rules] provide that a professional footballer may not pursue his activity with a new club established in another Member State unless it has paid his former club a transfer fee agreed upon between the two clubs or determined in accordance with the regulations of the sporting associations, the . . . rules constitute an obstacle to freedom of movement for workers.”[3] The Court also found that even if the restriction involved movement within a single member state, it would still constitute an illegal restriction on free movement.[4]

As a result, no European club, or national association, can require the payment of a negotiated fee for, or create any other bar against, a player moving to a new club upon the expiry of his employment contract. This thus establishes free agency for all European sports.

The Peñarol Decision

The Principle of free movement was then applied by CAS to cases involving players and club outside of the EU in Club Atlético Peñarol v. Suarez et al.[5] While not citing directly to Bosman, the CAS panel in Peñarol ruled that because FIFA and CAS are entities governed by Article 187 of the Swiss Public International Law Act (the “PILA”), they are required to seek guidance from Swiss public policy.[6] Specifically, the Panel in Peñarol observed that while a choice of law determines the applicable laws, Article 187 states that organizations incorporated under Swiss law cannot preempt Swiss legal norms if said preemption would contravene Swiss public policy, or violate a fundamental right under Swiss Law.[7]

Peñarol thus holds that CAS and the FIFA DRC are bound by basic human rights as recognized by Swiss Law and Public Policy.

Effects of Bosman and Peñarol

Switzerland and the European Union signed the Agreement on the Free Movement of Persons, which became effective on 1 June 2002.[8] That agreement, states that both Switzerland and the European Union Member states recognize the “right of free movement.”[9] This agreement occurred after Bosman.[10] Therefore, the panel in Peñarol essentially found that the Bosman decision applied to cases involving any dispute that fell under Art. 187 of the PILA. Both FIFA and CAS are organizations Established under the PILA, and therefore are bound by Art. 187. Therefore, Peñarol establishes jurisprudence where CAS and DRC panels should apply the Bosman ruling to any contract dispute, regardless where the dispute takes place because those bodies are subject to Art. 187 of the PILA.

 

Application of Bosman & Peñarol to Major League Soccer’s CBA Negotiations

A. Lack of a European Connection

The CBA between the MLS PA and Major League Soccer applies only to employment within the singular league. Because the freedom of movement issue applies only to that league, if a freedom of movement issue made its way to the FIFA DRC or CAS Major League Soccer may argue that there are no bars to freedom of movement. However, Major League Soccer operates three franchises in Canada, and therefore it has the potential to challenge the freedom of movement of players between those countries. Likewise, as Bosman stated, restrictions of movement of players within one “member state” may affect his freedom of movement to another “member state” “by preventing or deterring them from leaving the clubs to which they belong even after the expiry of their contracts of employment with those clubs.”[11]

In Peñarol, there was some connection to the European Economic Area, as a French Club (PSG) was pursuing the player in question. Therefore, Major League Soccer can argue that since the player movement here does not touch the EU or Switzerland, Peñarol should not apply. However, given the above referenced portions of Bosman[12] and the fact that Peñarol applied Swiss public policy to a Uruguayan Football Association rule, the fact that the rule does not affect movement to or within Europe or Switzerland may not matter.

B. Single Entity and Free Movement

There are three possible scenarios for a player when his contract expires. He can a) sign a new contract with his current club; b) join a new club competing under a different national association (an international transfer); or c) join a new club competing under the same national association his current club (a domestic transfer).

If a player signs a new contract with his current so long as the player agrees to an extended term, and that term follows FIFA’s (lose) 5 year contract term rule under Article 18(2) of the FIFA RTSP[13] there are, obviously no legal issues. The player is happy, the club is happy.

If a player decides to transfer to a new club at the end of his contract then the question becomes, does the standard set by Peñarol and Bosman overtake potential provisions in an MLS CBA?

For International Transfers, and transfers to other domestic leagues (NASL, USL Pro), the answer is an obvious yes. The CBA only covers terms of employment within the league itself. If a player signs with a new club in a league in a new country, or even a different league in the US, the CBA should not apply.

The more interesting question is: does Peñarol (and therefore Bosman) invalidate any MLS CBA restrictions regarding out-of-contract transfers between MLS franchises. As stated before Major League Soccer contract disputes may be subject to the FIFA DRC and therefore CAS jurisdiction. If the case went to the DRC, or later appealed to CAS, the player or the new club would most likely request the panels to apply Peñarol and Bosman. However, because of Major League Soccer’s single entity composition the arguments more difficult to apply. [14]

Each MLS franchise is technically a subsidiary of Major League Soccer. Therefore, the league would most likely argue[15] that a free agency dispute is not a freedom of movement issue so much as a freedom of association issue. Specifically, as a single entity, Major League Soccer has the right to negotiate new employment terms with employees, including where in the organization an employee can work, or a method by which the employee is selected to work at its various branches.

Although, because of the nature of the “business” franchises do compete for employees. It is not a stretch to argue that if a player is wanted by a franchise, if the league rules get in the way of the player moving to that franchise, it could still be found to violate the principles of freedom of movement.

If the dispute were between franchises in regards to the signing of a player, it would be very difficult to argue that those franchises are two branches of the same tree. If the league, or another club came between the signing of an out-of-contract player and a franchise, and the franchise brought suit before the DRC, a panel may find that the provisions for player movement after their contract has expired violates basic Swiss public policy. Therefore, like in Peñarol, the provisions regulating player movement after their employment contract has expired are invalid, and MLS players have the right to move freely to any new MLS franchise that will have him.

However, if the dispute arises from a player challenging, for example, a re-entry draft, and all of the franchises in MLS tow the same line, the league’s argument may carry some weight.[16] Freedom association, by all accounts, allows companies to condition terms of employment to working at specific branches of the organization.

 

Final Thoughts

Many have pointed to the fact that free agency is a major sticking point for MLS CBA negotiations. However give nature of the international transfer market, free agency will definitely exist for players moving on free transfers to different leagues, regardless of CBA terms. Likewise given the composition of US Soccer and MLS contract dispute resolution, the possibility of applying Swiss public policy also leaves enforcement of any current or future CBA terms inhibiting free agency in question.

This may hurt the bargaining power of the MLS Players Association. If players can already freely move to new leagues removing restrictions on Free Agency may not be a primary issue for a number of players.

Alternatively, because of the current employment market, FIFA DRC and CAS jurisprudence, and US Soccer and MLS dispute resolution procedures, any provision inhibiting free agency in the CBA could be circumvented depending on how the player goes about challenging the dispute, or where he decides to pursue his career. Therefore, free agency restrictions in the CBA may lose their teeth, depending on how they are challenged.

 

 

[1] Union Royale Belge des Sociétés de Football Association ASBL v Jean-Marc Bosman, (1995) C-415/93

[2] Id. at ¶ 99.

[3] Id. at ¶ 100.

[4] Id. at ¶

[5] TAS 2005/A/983 & 984, Club Atlético Peñarol v. Suarez et al

[6] Id.

[7] Id.

[8] See, Free Movement of Persons Switzerland – EU/EFTA, Swiss State Secretariat for Migration, https://www.bfm.admin.ch/bfm/en/home/themen/fza_schweiz-eu-efta.html.

[9] See, Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons [OJ L 114 of 30.4.2002].

[10] Id.; See also Bosman, (1995) C-415/93.

[11] Bosman, (1995) C-415/93 at ¶ 99.

[12] See Supra.

[13] See FIFA Regulations on the Status and Transfer of Players Art. 18(2) “while the maximum length of a contract shall be five years. Contracts of any other length shall only be permitted if consistent with national laws.”

[14] Although, this single entity composition creates other possible problems for the league.

[15] Aside from the fact that Swiss and EU labor law principles should not apply.

[16] Although a re-entry draft may violate art. 18 bis of the FIFA RTSP.