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(Fake?) News reports of Tottenham Hotspur tendering a $58 million offer for the services of Christian Pulisic have once again raised the issue of training compensation and solidarity payments. Whether or not this transfer rumor turns about to be accurate (and it looks pretty fake), this issue promises to rear its head down the line, as players affiliated with youth development in the United States are transferred/signed by teams overseas, and conversely purchased and brought in to play stateside.

This issue burst on the scene about 4-5 years ago, starting first with the purchase of Clint Dempsey by MLS (with the Seattle Sounders being his ultimate destination), and then with the transfer of Sounders right-back DeAndre Yedlin. In the case of the former, Dempsey was brought into MLS for a rumored fee between $7-9 million, while Yedlin was sold by MLS/Sounders to Tottenham for around $4 million. Focusing on the Yedlin case, the problem started when MLS/Sounders kept the entirety of his $4 million fee. His youth academy, Crossfire Premier, put in a request to receive a share of that fee, and when it was refused, they filed a complaint which was dismissed, and they have since pursued recovery through the Dispute Resolution Center.

Initially, the reason that U.S. Soccer gave for not complying with the FIFA statutes on training compensation and solitary payments was a stipulation that was agreed to back in 1997 as part of the Fraser lawsuit. Back then, numerous MLS players sued the USSF and MLS, alleging anti-trust violations due to MLS’ (convoluted) player movement and contract mechanisms. USSF was allowed to exit the lawsuit after signing a consent decree which stated that they would not abide by any FIFA regulations which restricted the movement of out-of-contract players in or out of the United States. That position appears to have changed as of February of this year, as the USSF is no longer citing the Fraser consent decree as the reason for not implementing or enforcing solidarity/training compensation payments. There is a good reason, as the consent decree clearly does not have anything to do with training compensation or solitary payments. So, let’s go through this.

FIFA STATUTES 20 AND 21:

The relevant statutes (“articles”) can be found at this link, but I’ll list them here.

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There are various calculations to determine how much money the former/training clubs are entitled to, and I’m not going to get into that here. So the next issue is, why did the USSF previously base their refusal to participate in this system on the consent decree:

FRASER CONSENT DECREE:

As previously mentioned, the USSF used the stipulation which got them removed from the Fraser suit to justify not allowing youth clubs to accept payments from teams who purchased players (or require that MLS or its teams pay them). Does the stipulation bar them from doing so? The answer has to be, “no.”

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As you can see, this is a VERY narrow stipulation, having to do with out-of-contract players who were restricted from moving on so-called “free transfers.” Free transfers didn’t exist until the Bosman ruling, previous to which, players couldn’t move from their old team to a new one when they were out of contract without a fee being paid. In fact, FIFA in the wake of the Bosman ruling modified its statutes.

This means that the USSF’s previous reasoning that the consent decree demanded that they not allow such payments was misleading…at best. Especially since the Bosman ruling came into play *before* this consent decree was signed. Based on the decree we’ve all just read, the USSF’s basis for not enforcing solidarity or training compensation awards due to Fraser is simply without merit.

WHO/WHAT IS PREVENTING SOLIDARITY/COMPENSATION PAYMENTS IN THE US, THEN?

Perhaps sensing that this legal fiction was unraveling, Sunil Gulati, as he was leaving his role as the USSF president, changed his reasoning on why USSF couldn’t get involved. In the wake of the Yedlin/Bradley/Dempsey complaint, the parties have been meeting for years, with no real solutions to the problem. It’s probably fair to say that USSF’s position now is that they have no legal authority through U.S. law to mandate a system or require MLS to comply with the FIFA statutes, though if all of the parties can come to an agreement, they’d be happy to work with all involved. At least based on the following excerpt:

“If the Fraser stipulation did apply to training compensation and solidarity, it only prevents USSF from taking any action with respect thereto. … USSF indicated at the Oct. 16 meeting that this was their interpretation.”

In other words, the federation would have no problem with clubs receiving these payments or drawing up substitute agreements with foreign clubs, as long as it wouldn’t have to facilitate them.

Now, it should be noted there have multiple complaints that the USSF have been slow walking requests from youth teams trying obtain compensation. There is currently a complaint pending before the Department of Justice over the USSF’s handling of the issue. So, it’s possible that the USSF’s position that they are okay with such payments/agreements is just lip-service.

So, what about MLS? Given their…close relationship with the USSF, one has to wonder if they are the ones behind the failure to institute a solidarity/training compensation system. The reason many suspect they are is that they were the ones who kept all of DeAndre Yedlin’s transfer fee (with the alleged assistance of Sunil Gulati), which gave rise to the controversy. On the face of it, MLS Commissioner Don Garber does not seem to have a problem if a system where MLS participates in compensation/solidarity payments is created.

“We are a member of U.S. Soccer, CONCACAF and FIFA, but we are also governed by U.S. law, and there are aspects of U.S. law as it relates to how we act in this space,” Garber said. “The best that I can say is, MLS will be a major beneficiary of solidarity payments going forward because of the number of academy players that we have, and yet we want to be very mindful and very careful about how we go forward here. I’m confident that Sunil [Gulati, U.S. Soccer president] and [MLS president and deputy commissioner] Mark Abbott and the respective attorneys will find a way to have an agreement and to move forward successfully.”

As Garber alluded to, MLS could benefit from these fees flowing into the league as its academy players sign abroad with increasing frequency.

Again, one must take this with a grain of salt, given the issues raised by them taking the entire Yedlin transfer fee and not paying training costs, but their underlying theory makes sense anyway.

Finally, we have the MLS Players’ Union. And based on the comments from their leadership, its fair to say they are the most opposed to any system where solidarity/training compensation is paid. It’s clear they are outwardly hostile to the idea.

“We have said consistently that training compensation and solidarity payments are bad for players, and would treat players differently than employees in any other industry, including sports,” Foose said. “For example, it’s absurd to think that a business school could demand a fee from a company that hired one of its students. Yet, that’s the kind of payments the youth clubs seek.

“No player should have the market for his services adversely affected by these payments. This is not to say that players and the Players Union don’t believe in and support youth development. We do, but it should not be funded through a tax on randomly selected professional players’ contracts.”

I’m not sure if the college analogy precisely fits, but you can see where the most animus to the idea comes from. Moreover, the USSF believes that the MLSPU would sue the youth teams (and possibly the USSF itself) if some system is implemented, either through USSF directive or were MLS able to come to some agreement with youth teams with USSF’s blessing. From Gulati:

“We’ve spent a lot of money with a lot of lawyers.  We have no issue with it except the players have an issue with it, and the players’ association (MLSPU) has made it very clear that if the youth clubs seek redress that they will sue the youth clubs.”

Gulati was likely referring to these sections from the Dallas Texans/Crossfire/Sockers FC lawsuit.

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And there is this follow-up from the same complaint.

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Yikes. Now to be clear, the above comes from the complaint filed by the youth teams, so the self-serving nature of the allegations must be noted. But given the responses from Mr. Foose, it’s hard to dispute the accuracy of the pleadings.

So we’re talking mostly about anti-trust law here. Restraint of trade/price inflation/wage suppression/price-fixing; take your pick. Not that I expect the MLSPU or the USSF to do this, but I’d love to see the legal memoranda from which they are basing their analysis. Not because I don’t believe it; I’d just like to comb through it myself.

Any system that were to be implemented is going to be subject to the “Rule of Reason” (you may be familiar with that phrase from the NASL/USSF suit) analysis. I don’t think a solidarity/training compensation system is per se illegal (called the “Quick Look” analysis), but even under the other standard, there are still going to be problems.

That aside, it seems to me we have two issues, assuming Mr. Foose’s basic legal analysis is correct: 1) The USSF apparently isn’t in a position legally to unilaterally enforce compliance with FIFA statues 20 and 21 (or to try to test it). 2) Given that premise, any training/solidarity system would have to involve an agreement between the youth development system, MLS and the MLSPU (and leagues at division 2/3 levels as well).

In MLS’ case, any reluctance to enter into some type of arrangement probably stems from their business model, in which the “league” takes anywhere from 66%-0% of a transfer fee, depending on the type of player you’re talking about (and the 0% was recently enacted). But again, they say they have no objection to implementing a system whereby training compensation and solidarity payments are made, since that would eventually be to the team and league’s benefit, when the teams’ local academies receive those payments.

For the MLSPU, the DeAndre Yedlin’s case is instructive, If the Sounders today sold him for $4 million, the team would keep the entire fee, whereas MLS used to take 25% ($1 million). The theory then from the MLSPU, is if this system was implemented by FIFA, that those costs (5%) are going to come from somewhere. Either the team/player is going to take a haircut on the sale, or the buying team has to increase the offer to offset the payments to youth teams (fat chance). There is also a difference between someone like Yedlin who was handsomely paid to move to the EPL, and a 20-year-old making a move for more modest money. So you see how convoluted things can get.

IS THERE A SOLUTION:

The short answer is, there could be, if the parties can agree to come to an accord.

USSF will not be involved in the creation of such a system, unless it is in a mediation capacity. They aren’t going to risk a lawsuit from the MLSPU (or MLS for that matter) by mandating a training compensation/solidarity system, or ordering payments be made.

MLS is happy to come to an agreement that allows them to receive and pay training compensation and solidarity payments, to the extent that they come out money from transfer fees. They probably come out ahead in the wash under that scenario, as more academy players are transferred or sign overseas.

MLSPU is extremely unlikely to agree to any system as currently constituted, and to the extent they are amenable to anything, it seems they would only agree if it came out of other revenues unrelated to transfer fees.

“These costs are a severe restriction on the player’s right to work and, as such, have no place in our system,” Foose said. “If a determination is made within the industry that youth clubs are deserving of additional compensation for developing young players, such compensation should come from revenues generated by the game itself, not out of the pockets of young players trying to earn a living.”

The term, “rock and a hard place,” comes to mind, but I think the thing to keep in mind is that it’s going to take an agreement of all parties to resolve this issue. Those wanting the USSF to send down a mandate, or enforce any awards that are given from FIFA are likely to be waiting for a long time.

81 Comments »

  1. Isn’t the USSF obliged to comply with FIFA regulations? Why couldn’t USSF order MLS to make the required payment to Crossfire? I understand they don’t want to get involved but that seems like nonfeasance.

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    • USSF can’t impose any FIFA regulations/statutes that run afoul of US law. It’s pretty clear that in this case, the MLSPA would sue. FIFA could in theory try to exert pressure, but its unclear whether they have the desire to, or how successful such a ploy would be.

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  2. I understand the payments acting as a tax on player movement and the potential legal issues with that but solidarity payments relate to another issue with U.S. Soccer, the “pay to play” system. If U.S. Soccer isn’t handing out scholarships and MLS doesn’t want to share money with the youth clubs, then how does the USSF and MLS abide by their mandates to develop American talent?

    I love the MLSPU’s comments:

    “For example, it’s absurd to think that a business school could demand a fee from a company that hired one of its students. Yet, that’s the kind of payments the youth clubs seek.”

    Great example. Business schools don’t demand fees because the students pay for their own training. Which students? Those that can afford it. And that’s ok because the business doesn’t have the mission statement to develop the best talent from all over the US; they just seek to maximize profit. USSF and MLS, however, do have that mission statement. Perhaps they too are just maximizing profit.

    Liked by 1 person

  3. Could you explain how the transfer fee system works. Does the player get a percentage of the fee from the buying club given to the selling club of said player?

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    • There are better people than I to explain the transfer fee system, but generally speaking it’s pretty straight-forward. Any team can submit an offer to purchase a player, and if that offer is accepted, the team then has to agree to come to terms with the player. So it’s a two-step process. As to the second part, I actually checked on this and players do NOT get a percentage of the fee. At least not as a general practice. Players can negotiate signing bonuses and the like, but getting a percentage of the selling fee isn’t standard.

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      • I never thought the player was compensated but looking over the CBA a couple months ago I found the following:

        Section 15.3 Except as otherwise provided in this CBA or otherwise agreed at any time in writing between the Player and MLS, the Player shall be entitled to receive from MLS (promptly upon receipt by MLS of such consideration) ten percent (10%) of any consideration received by MLS for any loan or transfer of the Player’s services to a team or league outside of MLS. This Section shall not apply to a loan to a USL Affiliate if the loan fee is used solely as a mechanism to cover the player’s salary.

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    • Generally speaking it works like this, a player who is under contract with a club desires to move to another club and that other club desires to hire that player. Since they are under contract, most clubs have a transfer fee, either a hard number written into the contract (usually only for big names like Ronaldo or Messi) or (more commonly) the current club has the legal option to negotiate the fee amount. Typically speaking, the player’s agent acts as a facilitator to these negotiations, frequently agents will get a fee for their services from the purchasing club (which incentivizes agents to try to arrange transfers…but that’s a whole other can of worms). Once everyone agrees, the fee is paid and the player is transferred; if it is an international transfer this can only happen during the two official FIFA transfer windows. Simple enough, right?

      If there are training or compensation fees it gets a bit more complicated. You can read the info directly from FIFA here: https://www.fifa.com/mm/document/affederation/administration/regulations_on_the_status_and_transfer_of_players_en_33410.pdf
      Articles 20 and 21 as well as Annexes 4 and 5 are the important bits. Training compensation happens for players under 23 who either get their first professional contract from another club or who transfer to another club before their 23rd birthday, essentially it’s a fee to ensure that if a club trained a player who goes elsewhere, their money isn’t wasted. These numbers are laid out broadly, but would be paid separate from any transfer fees. Solidarity payments are laid out more exactly, 5% of the transfer fee, with clubs getting a percentage of that based on what years they trained the player from years 12-23 of his life, years 16+ getting more compensation than younger clubs. It’s worth noting this happens for ever transfer fee forever. These fees are typically paid on top of the transfer fee, the buying club essentially views them as a tax on the transfer fee.

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  4. If u r a rah rah union guy…..this is one of those times u need to lool at the other side of the equation. Teachers union is also another ugly union that gets away with murder. They have a real poltically driven, manipulative, “it’s only diverse and open minded” if we say so, in the way we say it is, and only if we completely control it dark side. They keep more teachers jobless than anyone in this country TBH. If u r one of the union chosen ones great, if not, your education was a waste. The more one learns the Police ain’t far behind.

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  5. *puts on his tinfoil* Personally, I think the opposition from the MLSPA/MLSPU is a bit of ruse here. The Union wants something from MLS in exchange for this and they know they have MLS by the short and curlies; my suspicion is that want regular free agency like throughout the rest of the world in exchange for giving up the solidarity payments.

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  6. Here’s my issue:
    I see Training Comp & Solidarity as two different considerations. I personally believe Solidarity should be allowed. Transfer fees typically do not go to the player so you are not taking anything away from them and the restriction of trade is based solely on the agreement of the clubs on the value of the player. Also, Solidarity is paid by the purchasing club to all involved parties. And it is already widely accepted by all leagues under the FIFA governorship.
    With regards to Training comp, my major concerns are:
    1. US is still largely a Pay-to-Play system. When youth players sign up with teams in Europe and most other mature leagues, the players sign contracts and the club take responsibility for (at the very least) all soccer related expenses. You only find this process with the large MLS clubs and typically only at the older Academy ages (U16 – U18). So youth clubs are essentially asking to get paid twice; by the parents, and then the interested club.
    2. Restriction of movement by inflating training compensation costs. Firstly, unlike solidarity, you are asking clubs to pay for an unproven product. This is even more difficult for European teams that may see some potential in a US player but cannot accurately gauge their performance due to lack of knowledge of the Academy teams and leagues. There are multiple examples in which US players have lost opportunities to move overseas because youth cubs seeking to make a quick buck have demanded ridiculous fees. In most cases these clubs take advantage of the fact that most European clubs are unaware US Soccer does not require or enforce training compensation. For every high profile youth player that got a transfer approved, (because of the publicity involved), there are at least 10 that did not get their ITC through or the club eventually pulled out due to unreasonable requests. I personally believe this is a bigger detriment to the development of our players than clubs get a few payment no and then. Plus there is no guarantee or expectation that the money would ever go back to the players.
    So I have no issues with solidarity payments and think the MLS and youth systems could largely benefit from it. I do believe training compensation reeks of all the concerns stipulated by Mr. Foose.

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  7. This issue has been burning for many years, it didn’t burst onto the scene five years ago. Around 2007, the Boston Bolts refused to release Charlie Davies to Hammarby w/o payment but Hammarby refused b/c of USSF policy and Charlie had to pay Bolts $10k of his own money to get the release signed.

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  8. Not sure why Union would be against this. More development of youth players would lead to; more transfer fees for MLS players to europe, better players, better tv deals, etc. In the long run, it’d be better for the financial plight of the American/MLS player?

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