The lack of spectator and sponsorship revenue during the COVID-19 pandemic is forcing sports clubs to rethink their finances. Salaries for players and coaches are a particular burden in this situation. If individual clubs take protective measures such as salary cuts, there is a risk of exodus. There have been calls for clubs to coordinate on salary cuts and stopping transfers. However, current proceedings highlight the potential implications of such agreements under antitrust laws. Sports clubs are in competition with each other and are, in principle, subject to the prohibition of anti-competitive agreements. However, the specifics of sports and the current pandemic must be taken into account when assessing such arrangements.

Salary cuts 

The Lithuanian antitrust authority recently handed the domestic professional basketball league and its ten clubs fines ranging from approximately 1,000 to 17,000 euros. The reason for this was an agreement between the clubs and the league to cancel the 2019/2020 season due to the COVID-19 pandemic and not to pay players any further salary or provide any other financial compensation. The antitrust authority, after being leaked numerous emails as evidence, characterised this agreement as an anticompetitive arrangement. Salaries, it said, are an important competitive factor that influences players' transfer decisions for the coming season and thus indirectly affects a club's success. COVID-19 would not be a justification for such agreements, which have detrimental effects on both players as employees and fans as consumers. Further details are not available and may not become public, as clubs may, in light of the very small fines, decide not to take action against the decision. 

Interestingly, the Polish antitrust authority is also investigating the Polish basketball league and its 16 clubs for similar agreements on termination and salary arrangements. During the proceedings, the Polish authority has exchanged views with the European Commission, which shares its concerns.

Salary caps 

In September 2021, Mexico's antitrust authority fined the domestic soccer federation, 17 clubs and eight individuals a total of 8.9 million USD for colluding on salary caps in women's soccer (750 USD per month). The collusion allegedly limited competition between clubs for the best female players and increased the gender pay gap. In addition, the clubs agreed that a transfer fee would be payable for male players even if their contracts had expired.

In the UK, a salary cap for League One (3rd division) and League Two (4th division) was - independently of the pandemic - introduced for the 2020/21 season. It was abandoned shortly after its introduction. The cap was intended to promote sustainability and curb salary inflation. 

No-poaching

In April 2020, the Portuguese football league published a decision by all its first- and second-division clubs not to sign players who had unilaterally terminated their employment with other clubs due to pandemic-related incidents such as non-payment. The Portuguese antitrust authority considered this an illegal restriction of competition and ordered the clubs to terminate the agreement or else pay a fine of 6,000 euros for each day it was still in effect. COVID-19 would be no justification for such agreements between competitors. 

The Colombian competition authority launched an investigation into the domestic men's football league. Since 2018, 16 of the 20 first division clubs and their managers allegedly created a list of players who they were not allowed to poach from each other. As a result, the players could not negotiate transfers and better terms with other clubs while under contract. A decision is still pending.

Transfer limits

As of the current season, the Brazilian soccer association only allows one change of head coach per season in its highest division in order to counter the hire and fire mentality of the clubs in that division. Last season, 17 of 20 clubs changed their head coach. On average, head coaches in Brazil only stay in their jobs for just under six months. According to the association, the new rule is intended to put an end to the "chop-and-change" mentality and corresponds to similar restrictions on player transfers. If a club wants to change the head coach for a second time during a season, the new coach would need to have already worked at the club for at least six months - for example, as a youth or assistant coach. In case of a voluntary resignation or a termination agreement, however, the restriction does not apply to the club, but only to the head coach in question.  As far as publicly known, this restriction has not been investigated by authorities.

Antitrust considerations

These examples illustrate that the impact of the pandemic poses significant challenges for sports clubs. A coordinated approach by the clubs, usually organized through the relevant associations, may therefore be a natural solution. However, as competitors, the clubs are subject to the rules of antitrust law. Accordingly, competitors must act independently of each other in principle and, in particular, may not coordinate on parameters relevant to competition, such as salaries, prices or employees. In addition, as a protective right for players and head coaches, there is the so-called freedom of movement for employees, according to which EU citizens are free to choose their workplace within the EU.

Under certain circumstances, however, restrictions can be justified: On the one hand, regulations (of sports associations) may be permissible in principle if they enable or protect what is necessary for a fair system of play to determine the best in a sport through fair competition. Unlike in other economic sectors, competitors in sports depend on each other - only a large number of competitive clubs guarantees an attractive league with corresponding revenue opportunities. On the other hand, cooperation between competitors can also promote competition or enable it in the first place. This can be the case in particular with temporary measures to overcome the effects of the pandemic. For example, the German Federal Cartel Office has reached an agreement with the German Association of the Automotive Industry on an antitrust framework for crisis management. 

Agreements between clubs to pay players no salary or a reduced salary (e.g. in the cases in Lithuania and Poland) hardly seem justifiable even in a pandemic situation. In contrast, salary caps (e.g. in the cases in Mexico and the UK) are being discussed as permissible restrictions to ensure fair competition. For UEFA, indirect restrictions on player salaries result from the Financial Fair Play rules, which also provide for specific sanctions on transfer activity and salaries in case of violation. In terms of transfer issues, on the one hand, the payment of transfer fees for players without contracts (as seen in the Mexico case) has been taboo in the EU since the Bosman court ruling. On the other hand, transfer windows for contracted players and restrictions on loaning players are implemented in Europe, so corresponding measures regarding coaches (as seen in Brazil) also seem possible. Blanket bans on poaching (as seen in the Portugal and Columbia cases), on the other hand, are unlikely to be justifiable. Only recently, the EU Commissioner for Competition, Margrethe Vestager, made clear that so-called no-poaching agreements are increasingly on the radar of the EU competition watchdogs. 

Sports clubs should consider the permissibility of such measures before detailed discussions with other clubs take place. If in doubt, informal consultations with the relevant antitrust authorities may be an option.

Special thanks to Kjell Tönjes, legal trainee in the antitrust team in Berlin, for his assistance in the preparation of this article.