For those people who are not familiarized with the MLS and its legal nature, nor its rules and regulations, we are going to summarize them in order to understand the issue we are dealing, and it is not another than the following: Does the MLS act as a “third party” according the FIFA definition and the FIFA ban?

First, it is fair to indicate that the MLS rejects to enter into agreements with the investment funds which have interests on players with the purpose of those players play in the League. Namely, related to the most common practice that we know, they (TPOs) carry out, the MLS maintains its distance. But the question is: why are we making reference that the MLS may enter into agreements with players?

 Well, the MLS unlike the rest of the first-rate internationals leagues, works with the principle called “single-entity”. Such method of operation is based on the fact that the league acts as the parent company and the teams are subsidiaries, the MLS has the bargaining and economic power over the teams, notwithstanding they act impendent of one another, and because of this, the League’s rules constrained the players’ ability to freely market their abilities. The players negotiate their contracts and their salaries with the MLS and the latter pays them, in addition to determine the team they will play for based on the allocation ranking, there are also other ways to incorporate a player to a MLS’ team: the SuperDraft, the Re-entry Draft (for the players who were waived by a team) o simple trades.

These rules are for every player the same; except for the Designated Players (anyway there are exemptions as we can see below with the Jermain Jones case). These kinds of players are those who their salary exceeds the maximum fixed by the MLS, and that salary has to be paid by the teams. Each team has the possibility to sign three Designated Players.

The “standard” players therefore, do not have this privilege and they are assigned to different teams depending upon several factors, the reason why the freedom of choice and movement are constrained. Even though, as it stated at the 2014 MLS Roster Rules and Regulations, regulation III.B) related to the transfers and loans, these are subject to the “consent of the player”. Anyway we should bear in mind that the regulation makes explicit reference to the transfers and loans.

The players are not able to negotiate with clubs, just with the MLS, this will inevitably lead that the employer which they must enter into the agreement to play ‘soccer’ in US is the own League. This principle of single-entity allows the MLS to unilaterally implement Collective Bargaining Agreement, which the MLS agrees with the MLS Players Union (MLSPU) the terms without fear of antitrust violations[1]. In fact the North American Courts knew about this antitrust issue and the MLS as a single-entity (Fraser v. Major Soccer League, L.L.C.[2] and Brown v. Pro Football, Inc.[3]) and they held that the system used by the MLS did not contravene the ‘Sherman Antitrust Act’, specifically its Section 1. At these lawsuits the players were looking for to face the single-entity principle and implement the free agency one, which is the principle that the rest of the leagues use to grow up as a business at the highest level.

Coming back to the collective agreement, the importance of this Collective Bargaining Agreement is vital. In that agreement are stablished all the employment conditions which will regulate the relationships between the MLS (as an employer), with the player (as employees). At this moment the MLSPU and the MLS are discussing the terms of the new CBA, where, I am sure, this will be an important concern and one of the keys[4].

On the other hand, all the incomes that the teams should receive if we take the European leagues as an example, are for the MLS sometimes, for both parties (team and league) other times (the known ‘management fee’), and finally just for the team. To clarify this matter, we will put some examples:

The singularity of this last example above in relation with a possible transfer of a player, is founded on the fact that the MLS has on the one hand, the ability to veto of such transfer to an over areas club, or the ability to veto the incorporation of a player to a particular MLS team despite the player’s will to be part of another team (we will see the J. Jones example now) because they forward to their own allocation rules. On the other hand, the MLS has also the authority to force the sale of a player against the team’s will (as we have seen, with the consent of the player) because, technically, his rights are owned by the MLS, as well as his contract.

With the purpose of illustrating this situation we will expose an example which occurred with a Designated Player as Jermain Jones is[5], who moreover is a North American ‘soccer’ Team player which is coming back to US. Because of this, the franchises have the right to assign themselves the player in accordance with the position of the team at the allocation ranking, besides they should be willing to pay the salary that the player is asking for, which will be paid by the team because he is a Designated Player. Well, New England Revolution and Chicago Fire were fighting to get the services of the American player, and despite that the intention of the player was to sign for Chicago Fire, the MLS assigned the player to New England Revolution due that was what the MLS rules stated.

So, is the MLS acting as a “third party” according to the influence that the article 18bis states? The logical answer seems it could be a yes. But to dive in this topic we will analyse the FIFA definition of “third party” and the FIFA ban which will come into force on 1 May 2015, on the occasion of the Circular no. 1464[6], which modifies the FIFA Regulations on the Status and Transfer of Players.

“Definitions

(…)

14. Third party: a party other than the two clubs transferring a player from one to other, or any previous club, with which the player has been registered.”

It seems like the Major Soccer League, L.L.C. (company used by the MLS to operate in the market) fits within the given definition at the FIFA Circular. Being the MLS “a part other than two clubs” in the event a player is transferred to a MLS team, and the player should sign his employment contract with the MLS (although it is true that the most of the time they sign a player without an employment connection with another club).

“Article 18bis         Third-party influence on clubs

Also, it seems like based on the exposed by this article above, some actions involving transfers of the players and the clauses and terms unilaterally fixed at the player’s contract via CBA and Roster Rules and Regulations (named above as well) are applicable to the scenario that the 18bis raises. As far as we know, to reach an agreement to transfer a player between two clubs, you must go throw the MLS, which is the entity that engage the services of the players and then they assign the player to a team, influencing in employment and transfer matters at the moment the MLS forces a player to be part of a team (based on its allocation rules) who, we should not forget it, belongs to the MLS, and also, the power to veto when a club wants to trade with a player. It seems that the “influence” requirement is meet.

“Article 18ter         Third-party ownership of players’ economic rights

The simple fact that it is stablished that a 1/3 of the total amount paid to transfer a player over areas goes to the MLS (even though the latter could share this money between the MLS teams) allows that such fact could be framed in this recently created article. Because once the player is entering into an agreement with the MLS, the MLS system implemented and its rules state that a third part in a future transfer compensation of the player would be for the own League.

We find ourselves seeing that the MLS is managing a league under the single-entity principle and therefore it is acting as a third party in a way banned by FIFA. But, when has FIFA jurisdiction to act against one case that violates its Regulations?

The MLS is growing year by year, and the investors are betting in the league which is increasingly famous. But to carry out this pretended developing is necessary they do an international approach, the MLS should open itself to the world and show its value, because the most powerful leagues in the world are for away from US, unlike other sports as the basketball (NBA), American football (NFL), or ice hockey (NHL), where this model is suitable and effective. The MLS, to grow up, is obligated to accomplish international transactions and to operate in a global market. And for these international transactions, the mandatory regulations are the FIFA Rules and Regulations. This does not happen with local disputes where all the parties have the same nationality (US), as has been said, the single-entity system is allowed by the national law. The problem appears when given the necessity to open themselves to a global market generates international disputes, where one of the parties is not North American and where FIFA has jurisdiction, and the obligation, to act against this practice incompatible with its provisions[7].

As can be seen, the new CBA is in the negotiation phase, with the previous about to expire, I am sure that the MSLPU will use this card to press and force the MLS for the free agency system which would allow having that freedom of movement that they lack, or at least, to get some new privileges for these employees (the players). And if we talk about this freedom in football it is impossible does not make a reference the Bosman Case, where the European Court of Justice (C-415/93), summarizing a lot (it worth another post), held that the rules required the payment of a fee owed to his last team related the incorporation of a player when his employment contract was expired was illegal based on this fundamental right recognised at the articles 48, 85 and 86 Treaty on the Functioning of the European Union[8]; such judgement prohibited (in this singular case) to the sport associations or federations at the national or international level may establish at their regulations limits to the access of the professional EU players (employees) to the competitions. But the fact is that in this particular case where we are referring to such freedom and to a non-European country brings us the Peñarol v. Suarez Decision (CAS 2005/A/983 & 984), where the Court of Arbitration for Sport (CAS) applied this principle on the basis of the article 187 Swiss Private International Law Act (the “PILA”), which 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 and the CAS resolved this case taking into account that the CAS and also FIFA are addressed in Switzerland (they are built and governed by the Swiss Law), in addition to the human rights recognized by the International Community. Moreover, the European Union and Switzerland signed on 1 June 2002 (post-Bosman era) an ‘Agreement on the Free Movement of Persons’, officially recognising such right[9]. The question is: If the freedom of movement is restricted by the MLS to a player to sign for another over areas team, would this legislation and the case law be of application? It seems like it could be.

In my opinion the MLS’ will in order to have a balanced competition is wise, but they should bear in mind that ‘soccer’ is just ‘soccer’ just for them and their necessity to grow up as a league makes that these restrictions that they are stablishing to themselves should be tempered with the purpose of fighting against other leagues which are on top.

SOURCES:

[1] Kicking “Single-Entity” to the Sidelines: Reevaluating the Competitive Reality of Major Soccer League after American Needle and the 2010 Collective Bargaining Agreement (By Northern Illinois University Law Review).

[2] Fraser v. Major Soccer League, L.L.C.

[3] Brown v. Pro Football, Inc.

[4] MLS' Single-Entity Structure Is the League's Biggest Obstacle (By Peter Galindo, Featured Columnist at Bleacher Report) / Jan 24, 2015

[5] TPO in America: How would FIFA's third-party ban affect USA leagues? (By Liviu Bird, SI.com) / Oct 30, 2014.

[6] Circular no. 1464 on 22 de December 2014 which modifies the FIFA Regulations on the Status and Transfer of Players.

[7] Comments of the well-learned Brazilian sports lawyer, Marcos Motta, in the SI.com article.

[8] El Caso Bosman: Sus consecuencias (By Juan de Dios Crespo Pérez).[9] The 2015 MLS CBA, how European Law Affects Free Agency in American Soccer (By Andrew Visnovsky).