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 5^th 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.  

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. You can read the subsequent pieces here: II.

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] 

MLS Player’s Association Ratify 2015-2019 Collective Bargaining Agreement

The MLS Players Association announced their ratification of the 2015-2019 MLS Collective bargaining Agreement on July 16, 2015. In a press release, the player’s association announced some major changes to the agreement.[1] Here are some major points of interest.

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.

Reebok CrossFit Games Competition Outline

Operating in three phases, the Open, the Regionals, and the Games, The Reebok CrossFit Games is the centerpiece in the pantheon of competitive fitness competitions. The final phase of this year’s Reebok CrossFit Games will take place on July 21-26, in Carson, California.

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=

Crossfit Governance, How The Sport of Fitness is Regulated.

CrossFit, and its method of competitive cross training, has exploded in popularity since its inception 15 years ago. It has become a worldwide phenomenon, challenging the nature of the fitness and sports industry. With the Reebok CrossFit Open around the corner, it is a good time to ask some questions about how the young and growing sport is governed.

What is Crossfit?

 

CrossFit was established as a training philosophy in 2005. This philosophy focuses on “functional” movements, and incorporates cross training, olympic weightlifting, bodyweight fitness, gymnastics, powerlifting, among many other disciplines. Over time, the methodology has branched out to various specialized crossfit[1] programming: CrossFit Kids, CrossFit Football, CrossFit Endurance, etc. CrossFit now accredits trainers, licenses its name to be used by affiliate gyms world wide, and has arranged sponsorship deals with the likes of Reebok for exclusive use of the “CrossFit” name on apparel.

Competitions:

 

One of the focal points of CrossFit, and the crossfit community is the triad of competitions under the umbrella of the Reebok CrossFit Games: the Open, the Regionals, and the Games. These fitness tournaments eventually culminate in awarding the title of “Fittest Man and Woman on Earth” to the champions of the Reebok CrossFit Games. This competition catalyzed sport of “crossfit” or as CrossFit would like you to call it: “The Sport of Fitness” or maybe a little more helpful the sport of “competitive fitness.” CrossFit now operates a few additional competitions, namely, The CrossFit Team Series, and the Reebok CrossFit Invitational.

Through the popularity of the training program, and the proliferation of CrossFit affiliate gyms globally, numerous crossfit/competitive fitness competitions have begun to sprout up. These competitions range from low-level amateur competitions[2], to extremely competitive elite competitions, like the Grid League.[3] Some of these competitions involve individuals competing over a few days, some involve teams competing throughout a season lasting months. despite their differences, all these competitions follow the same basic tenants that were originally established by CrossFit 15 years ago, and the competitive foundation laid by the Reebok CrossFit Games.

Who Organizes and Governs the Competitions:

CrossFit regulates its own competitions. It has its own competition rules, and its own anti-doping policy.[4] The implementation of these rules, and the implication of their violation is confined to only “CrossFit sanctioned” competitions.[5]

The vast majority of the competitions outside the Reebok CrossFit Games triad, the Reebok CrossFit Invitational, and the CrossFit Team series are not “CrossFit sanctioned.”[6] Save for a public shaming, a violation of CrossFit’s competition rules do not directly effect an athlete’s participation in the litany of other competitions that operate within the competitive fitness umbrella. Likewise, each one of those competitions, whether a competitive league with a multi-week season, or a one-off event bears the burden of governing themselves: establishing their own competition rules, regulations, and standards as well as enforcing them.

Marketing a Brand:

The fact that CrossFit does not more widely govern competitive fitness events lies in its desire to protect its brand. Because of lucrative licensing deals, and gym franchising, CrossFit stands to lose a large portion of its revenue stream if the term “CrossFit” becomes genericized. CrossFit’s zeal for brand protection is clear from the CrossFit Journal’s (an online publication produced by CrossFit) legal page. There, you can find a number of articles on successful brand protection suits, but much less regarding sport governance and regulation.[7]

Many of these suits involve gyms and sports product manufacturers using the term crossfit to market their businesses to their target audience, without CrossFit’s approval. These companies argue (for the most part) that the term “crossfit” is a generic term describing certain activity/training style that anyone can do. Therefore, the term crossfit cannot be a protected term, just like the term “baseball” or “hockey” cannot be a protected term.

However, CrossFit argues (for the most part) that “CrossFit” is a brand name that has created its own goodwill, which certain companies are attempting to hi-jack, which will confuse the consumer. They Liken themselves to Coca-Cola: lots of people make soft-drinks (fort their purposes, athletic training programs and competitions), but there’s only one Coke (or for their purposes, CrossFit).[8] Generally, courts find this argument persuasive, and side with CrossFit.[9]

Therefore, CrossFit stands to benefit from non-CrossFit affiliated competitions, and refraining from governing the entirety of the sport. Avoiding wider governance shows that CrossFit is one of many organizations in the space of the sport of “competitive fitness.” Therefore, the name CrossFit informs consumers of a specific source of a specific product, and ability of CrossFit to protect the use of that name benefits consumers, and is appropriate.

The Governance Issue:

Since CrossFit stands to benefit from refraining from becoming a governing body for the entirety of “competitive fitness,” how is the sport regulated? How does that affect those participating in the sport?

In short, the sport is regulated on an ad-hoc basis, competition to competition.

For athletes, this means a few things. First, they are subject to numerous rules and regulations, and competition standards, all enforced separately. Therefore, a competition violation resulting in a ban from one competition will not apply in a different competition. Likewise, athletes could be forced to defend themselves in multiple disputes with multiple competition organizations, (each following different procedures, and rules), for a singular action allegedly taken by the athlete. For example, an athlete could be charged by multiple competition organizations for violating each competition’s doping regulations resulting from a single alleged event, and be required to defend all of them in different forums.

More likely, however, is that since a majority of the competitions are short one to two day annual occasions, the massive cost of mounting enforcement of sport governance means that the rules (if they exist in the first place) are enforced loosely ineffectively, and irregularly, if at all. Potential Arbitration, possible law suits, or engaging a drug testing facility for enforcing doping standards are all costs that a single day competition in a fledgling sport will have difficulty covering.

Is an Independent Governing Body the Solution?

Should an organization come together to govern competitive fitness competition? Possibly. It benefits CrossFit, as they can further protect their intellectual property and good will by further showing that they are just another soda in the competitive fitness cooler. Likewise, it would (hopefully) create a straightforward and transparent sports governing system for athletes competing in competitive fitness events through the world.

However, creating a new global governing body will take away some authority from CrossFit, and other major competition organizers like the Grid League to control their competitions.

Ultimately, it would be up to these competition organizers to agree on some sort of over-arching governing body. As the sport grows, there may be a push to create a global governing body to meet the demands of a sport growing at exponential levels.

[1] For some simplicity, I will be using “crossfit” when talking about the sport/training method and “CrossFit” when talking about the brand.

[2] For Example, The Festivus Games, https://festivusgames.com/

[3] https://www.npgl.com/; see also, Wodapalooza http://www.thewodapalooza.com/; Kill Cliff East Coast Championships, http://ecchampionship.com/blog-2/

[4] See e.g., The Crossfit Games Rulebook, http://media.crossfit.com/games/pdf/2015crossfitgames_rulebook_150106.pdf; 2015 CrossFit Drug Testing Policy, http://media.crossfit.com/games/pdf/2015CrossFitGames_DrugTestingProgram.pdf

[5] See 2015 CrossFit Drug Testing Policy Art. 11.

[6] It should be noted that it is often difficult to ascertain whether a competition is “CrossFit sanctioned.” Many competitions are sponsored by Reebok (the exclusive CrossFit apparel sponsor) or even the Reebok CrossFit Store, but make no other mention to a CrossFit affiliation. Although, it can be fair to assume that if the competition refers to itself as a “fitness competition” or some other vague term, and not a “CrossFit competition,” it is safe to assume it is not a “CrossFit sanctioned” event.

[7] See, CrossFit Journal, Legal, http://journal.crossfit.com/legal/

[8] See, Saran, Dale, If It Doesn’t Say CrossFit, It’s …, The Crossfit Journal, at 4, http://library.crossfit.com/free/pdf/CFJ_CF_Saran2.pdf

[9] See, E.g. Burton, E.M., Victory In Quebec, The Cross Fit Journal, http://library.crossfit.com/free/pdf/CFJ_Quebec_Burton.pdf

Major League Soccer and FIFA’s Third Party Ownership Ban. What You Need to Know.

FIFA announced on December 22, 2014 that as of May 1, 2015, Third Party Ownership would be banned from professional soccer competitions.[1] Unfortunately, for US soccer fans, by virtue of Major League Soccer’s single entity structure, the league itself may be a third party owner. The new global ban now has the potential to completely up-end the US’s top-level soccer league.

Third Party Ownership

Third Party Ownership is, in its simplest form, an agreement between a club, and an investment company to cover the initial cost of a transfer fee, in exchange for a percentage of a future transfer fee that the club may receive when the player is sold to a new club. This practice has become extremely prevalent in Argentina, Brazil, and Portugal, among others, because it allows clubs to add players to their roster that they could not otherwise afford.

Opponents of the practice argue that Third Party Ownership inflates player transfer market values. This in turn decreases the ability of clubs to field competitive squads while staying within their financial means.

Additionally, third party ownership agreements have the potential to take roster and transfer decisions away from clubs, which threatens the integrity of the sport.

Because of this, various leagues, including the English Premier League and the French Ligue 1 have banned Third Party Ownership outright. As well, FIFA instituted article 18bis of its Regulations on Status and Transfer of Players, which banned third parties from influencing roster and transfer decisions.[2]

MLS Single Entity Organization.

Major League Soccer is a “single entity.” This means that all of the teams are technically subsidiaries of the league, and team “owners” are merely stockholders of MLS, who also act as managers of the business affairs of the individual franchises. Put simply, the clubs are local branches of a larger MLS business.

The purpose of the single entity structure is to avoid potential anti-trust lawsuits that other U.S. sports leagues were subject to in the past. Due to case law established in Copperweld Corp. v. Independence Tube Corp., an organization and its wholly owned subsidiary cannot violate Section 1 of the Sherman Anti-Trust Act because they are not separate economic entities and thus cannot enter into a conspiracy (or agreement) to restrain trade.

Sports leagues in the United States have had a special struggle with anti-trust law. Under Radovich v. National Football League, the U.S. Supreme Court held all sports leagues except Major League Baseball were subject to the Sherman Act. However, Mackey v. National Football League allowed leagues to avoid some Sherman Act scrutiny by bargain with players’ unions regarding roster and employment policy via the Sherman Act labor exemption. However, Los Angeles Memorial Coliseum Comm’n v. NFL determined that requiring a vote from other league clubs to approve a move by another club to a new city violated the Sherman act. As well, American Needle, Inc. v. National Football League determined that when leagues grant exclusive licensing deals with manufacturers to use logos and other intellectual property of the constituent clubs they violate the Sherman Act.

If a sports league were a single entity, under Copperweld, it could avoid those legal issues. From that, it is clear that Major League Soccer opted for a single-entity structure to give them more freedom in their ability to organize and regulate their league, and their commercial enterprises.

Single Entity and Player Ownership

Because of the MLS’s single entity structure and roster rules, the MLS is the bargaining unit for international transfers. The MLS negotiates the purchase and sale of players moving in and out of the league. The MLS is also the organization that cuts and cashes the checks when players move in and out of the league on a transfer fees. Therefore, the league owns the economic interest in the player instead of any individual club or franchise.

FIFA’s 18ter

On December 22 2014, FIFA posted its proposed ban on third party ownership. The new regulation, 18ter, which came into effect On January 1, 2015 and comes into force on on May 1, 2015, states:

No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation.[3]

Under 18ter, a “third party” is “any party other than the two clubs transferring a player from one to another, or any previous club, with which the player has been registered.”[4]

Application of 18ter to Major League Soccer

Two issues arise when applying 18ter to Major League Soccer: 1) is the league a third party owner, and 2) has it “entered into an agreement” with its franchises?

Per the definition of a “third party” under 18ter, Major League Soccer is neither 1) one of the two clubs transferring a player from one to another,” nor 2) “a previous club which the player has been registered.” It could be said that since the clubs are subsidiaries of the league, the league is technically all of the clubs. However, since the regulation specifically mentions clubs, and Major League Soccer is more than just a “club,” it most likely fits in the category of “any other party,” and therefore a third party owner.

Whether Major League Soccer enters into an agreement with its franchise subsidiaries when establishing its single entity structure is unclear. From a reading of Copperweld, it seems as though US case law states it is impossible for a parent company to enter into an agreement with its wholly owned subsidiaries. However, a FIFA DRC panel, or a CAS tribunal, not bound by US law, would determine whether an agreement existed. It could be found that the league roster rules, the CBA, and the general arrangement of the league is a de facto agreement between the clubs and their parent league to cede control of players movement into, out of, and within the league. This analysis would lead to a finding that the MLS league structure violates new article 18ter.

Additional Considerations

There is a possibility that Major League Soccer may change its league structure without the push of 18ter. There have been a few recent conflicts between clubs and the league over roster policies. Most notably, Chicago Fire’s lost its bid for US international Jermaine Jones due, at least in part, to MLS Allocation player rules.[5] As well, LA Galaxy Manager Bruce Arena took issue with MLS’s negotiation strategy on a bid for Sasha Kljestan.[6] As the MLS continues to grow, additional similar conflicts may cause Major League Soccer’s reconsideration of its roster and transfer policy, if not completely reconsider its single entity status.

Practicalities

Problems with the single entity ownership issue may begin upon the July 2015 MLS transfer window. As all international transfers must be registered via TMS and all rights holders to the players being transferred must be included, the MLS should be listed on the TMS international transfer. The system may not allow the transfer of registration to go through if the rights holder is not listed as the registering club.

If a TMS issue does not arise, a challenge to Major League Soccer’s Third party Ownership must come from a dispute involving a player or club, and Major League Soccer. [7]

Sanctions

Article 18ter is vague on the result of a finding of a third party owner stating only that “the FIFA Disciplinary Committee may impose disciplinary measures on clubs or players that do not observe the obligations set out in the article.” This is interesting, because it does not allow any punishment for leagues that allow the practice to continue. However, since the sanctioning language is broad, it could force MLS franchises to own the players rights themselves, and not defer them to MLS, should a case before the FIFA DRC or CAS go forward. As well, the wide discretion may allow Major League Soccer a pass as the DRC or CAS could find that no sanction is necessary as league ownership is not a practice that the regulation intended to abolish.

Conclusion

 

FIFA’s new article 18ter may put the MLS single entity structure in jeopardy. Unless either Major League Soccer changes how it organizes its control over player movement in and out of the league, or finds relief somewhere by FIFA or CAS, it may be forced to significantly alter its business model in the near future.

Additionally, if clubs are given more independence and begin to actually compete for players in the transfer market, single entity protection may unravel, causing additional legal headaches for the top-flight North American league.[8]

[1] See FIFA’s press release on the matter: http://www.fifa.com/mm/document/affederation/administration/02/49/57/42/tpocircular1464_en_neutral.pdf

[2] 18bis states “No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.” See FIFA Regulations on the Status and Transfer of Players, Art. 18bis(1).

[3] FIFA RTSP Article 18ter(1)

[4] Berry, Richard R.I.P. TPO: A Guide to FIFA’s Ban On Third Party Ownership, Law In Sport, http://www.lawinsport.com/articles/item/r-i-p-tpo-a-guide-to-fifa-s-ban-on-third-party-ownership#references

[5] Murray, Shane, After missing out on Jermaine Jones, Chicago Fire’s Frank Yallop not giving up on adding “top player,” http://www.mlssoccer.com/news/article/2014/08/28/after-missing-out-jermaine-jones-chicago-fires-frank-yallop-not-giving-addin

[6] Young, Jared, The MLS CBA: Unpacking Don Garber’s recent comments on single-entity, The Brotherly Game, http://www.brotherlygame.com/2014/9/24/6836267/the-mls-cba-unpacking-don-garbers-recent-comments-on-single-entity

[7] Note, however, that a challenge like that would only make it before FIFA and CAS if there was an international dimension, and that the FIFA DRC/CAS found that the MLS Grievance Procedure does not comply with FIFA’s dispute resolution standards.

[8] Additionally, under Fraser v. Major League Soccer the US First Circuit Federal Appeals Court felt that Major League Soccer may not be totally a single entity under Copperweld, however it also held that the fact MLS competes with other leagues in the US as well as abroad for labor, it was not an illegal monopolization of the labor market.

Steven Gerrard’s Transfer to Major League Soccer

Gerrard’s Transfer to the LA Galaxy

Liverpool Legend, Steven Gerrard, announced that he will move to the MLS franchise LA Galaxy at the end of the Premier League season. While a huge deal for both Liverpool and LA Galaxy, a move to Major League soccer from Europe is not without its idiosyncrasies. Because of this, Gerrard’s marquee move creates a great opportunity to review the mechanics on high-profile moves in and out of North America’s top-flight soccer league.

Player Registration

According to FIFA rules, players must register with a club to compete in FIFA-recognized competitions . At the upper level, these registrations are logged via FIFA’s computerized TMS system. FIFA requires the use of the TMS for all international transfers of professional players.

A player can only register to a single club at one time. Even for loaned players, said players can only register with the team they intend to represent on the pitch.  Additionally, registration can only happen (with limited exception) occur during a designated registration period generally referred to as the “transfer window.”

This scenario is generally straightforward. Club A signs an agreement with Club B to transfer Player C’s registration during the designated transfer window. Or, as the Case is with Gerrard, Player A’s contract with Club B expires, and player A signs and registers with Club C.

However there are two difficulties regarding players competing in leagues outside of MLS moving to MLS franchises. First, the fact that the MLS season and therefore registration periods (transfer windwos) are different than most professional soccer seasons throughout the world. Second, because of MLS’s single entity structure and roster rules, what types of designated categories the player fits determines where the Player will go, and how much say the player will have regarding which MLS franchise the player is moved to.

Registration Period

Under most circumstances, a player can only change club registrations during designated registration periods. Most major professional soccer leagues follow an August to June season. Most leagues have two registration periods during those seasons, generally, one running through July and August and a second, mid-season, in January. However, the MLS season begins in March and runs through October. Therefore its registration period runs between mid-February and mid-March, and then again, mid-season, in July.

This poses an obvious complication for Gerrard, and any player moving between the MLS and foreign leagues. Specifically, deciding on the best time period to register with the player’s new american soccer franchise.

So long as a transfer is within the registration period for one of leagues involved, the registration can be changed. Gerrard’s Liverpool contract will expire in July, the end of his Premier League Season. He will then presumably (more on that later) register with the Galaxy with no transfer fee (or as it is better known in International soccer parlance, move in a “Bozeman” transfer) as he will be a free agent.

After the July transfer, Garrard will have played a full Season of EPL, Capital One Cup, FA CUP, and UEFA matches with Liverpool, since last August, after playing in the World Cup in the summer before that Season. The World Cup is also sandwiched between the end of the 2013/14 season and the beginning of the current 2014/2015 season. Additionally, by July, Major League Soccer will be midway through their season. With Gerrard playing so much football and moving stateside so late in the MLS season,  Fans may not see Gerrard competing on American soil until either the MLS playoffs (if the Galaxy qualify), or possibly may have to wait until the start of the Major League Soccer 2016 season. There is even a potential for Major League Soccer to loan Steven Gerrard back to Liverpool for the first half of Premier League 2015-16 season and join at the beginning of the 2016 MLS season.

Single Entity

A quick note: If the Player is moving to the MLS (like in Gerrard’s case), the player and the foreign club (if the player is still within the contract term with the foreign club) must negotiate with Major League Soccer, not one of the individual franchises. Luckily, “Designated Players” (like Gerrard) have more bargaining power with what franchise they move to, as they are more desirable to the League.

Designated Player, MLS CBA and MLS Roster Rules

Additionally, Major League Soccer has detailed roster rules, which all franchises must comply. These rules put various players into different categories, which have different effects on how players are brought to clubs and how their compensation is calculated towards the league’s salary cap.

Steven Gerrard will transfer as a Designated Player. Per the collective bargaining agreement between the MLS player’s association and Major League Soccer, each squad has a specific number of Designated Players whose individual salaries will not exceed $387,500.00 in the capped roster budget. In 2014 that number was three, although there have been rumors that the 2015 MLS CBA may increase that number. Therefore, Gerrard’s alleged $6M per year salary will only count towards $387,500.00 of the LA galaxy’s salary budget for cap purposes.

Likewise, unlike allocation players, Super Draft players, and lottery players, Gerrard’s Designated Player status allowed him some control over deciding where he wants to move within the league. Allocation slots and team selection order (for USMNT players coming into the MLS) depend on prior team performance and player transfer success. Super draft selections depend on player desirability and club performance the season before. Lottery selections follow the same process as Super Draft selections but occur when a player has signed with Major League Soccer after the Draft has occurred.

For Designated Players, a franchise must merely desire to sign a player, have an available Designated Player slot open and have the player desire to sign with the Franchise. Seeing as the LA Galaxy has an open Designated Player slot after the retirement of Landon Donovon, and seeing as in an interview Gerrard stated, “they [The LA Galaxy/MLS] basically told me what I wanted to hear,” it seems those requirements have been met.

One note: the MLS CBA gives Major League Soccer the ability to move players as they see fit. Specifically the MLS CBA[1] states that “a Player may be required, without his consent, to relocate to any Team in the League as directed by MLS.” This means, if for some reason, major chances come in the league, or the league feels the need to move Gerrard to a different franchise/media market within the league, it can do so without Gerrard’s consent. Whether that is legal pursuant to FIFA rules, FIFA DRC jurisprudence, or CAS jurisprudence is another story. While it is permissible within the rules, it would be an absolute PR nightmare for the MLS if Gerrard, or any player in that position protested, so it seems an unlikely event.

 

 

[1] The only full version of an MLS CBA available to the public expired on January 1, 2010. The following CBA effective until January 1, 2015 was never published, although a memo outlining changes was distributed. That memo made no mention of this section (15.1), so it is fair to assume it is still a valid provision. However, a new CBA is being negotiated at the moment, so this discussion may become completely moot depending on what comes from those negotiations.