Red Card for Competition Breaches in Labour Markets Globally

Aspects of FIFA player transfer rules deemed anticompetitive

The EU’s highest court — the Court of Justice of the European Union (CJEU) — has determined that aspects of FIFA rules governing the player transfer system for professional footballers violate EU laws on competition and free movement.

The dispute before the CJEU began when former French national team player Lassana Diarra challenged FIFA’s rules regarding a 2014 dispute with his then club, Lokomotiv Moscow. When Diarra left Lokomotiv before the end of his contract, he was ordered to pay €10 million to the Russian club. FIFA also temporarily suspended Diarra from playing football professionally, and Diarra was unable to register with a new football league as he did not have an international transfer certificate.

In a judgment handed down on October 4, 2024, the CJEU found that FIFA rules holding players who leave their clubs mid-contract without “just cause” liable to compensate the club “patently” restrict competition and are akin to a no-poach agreement that would breach EU competition rules (Article 101 TFEU). The requirement for buying clubs to cover compensation costs when a player terminates their contract early was also deemed anticompetitive.

The judgment is the latest in a series of cases where sports governance has clashed with EU competition law. In December 2023, the CJEU issued three judgments (European Super League, International Skating Union, and Royal Antwerp Football Club) that found that certain prior approval and eligibility rules set by FIFA, UEFA and the International Skating Union were anticompetitive.

While sports governing bodies should be alive to this increased scrutiny by EU authorities, the Diarra judgment also reflects a trend of growing enforcement in labour markets generally.

Increasing enforcement of competition law in labour markets

• EU: The European Commission has explained in its legislative guidance and Competition Policy Brief that in its view wage-fixing and no-poach agreements are inherently harmful to competition. As labour markets are often national, regional, or local in geographic scope, and therefore more likely to be considered by national competition authorities in EU Member States, the Commission is aiming to ensure a consistent approach to enforcement. Several Member States, including Belgium, Denmark, Finland, Portugal, and Spain, have carried out investigations in, or issued reports on, labour markets in recent years. Earlier this year, the Portuguese Competition Authority imposed fines of €3.8 million for no-poach agreements in the technology consultancy sector. The European Commission is also taking enforcement action at EU level: Last year it conducted its first labour markets dawn raid and has since opened a formal investigation relating to suspected no-poach agreements in the online food delivery sector.
• UK: The Competition and Markets Authority (CMA) has stated in its most recent annual plan that labour markets will be a growing area of focus. Earlier this year its Microeconomics Unit issued a report on competition and market power in UK labour markets. Last year, the CMA issued guidance for employers on how to avoid anticompetitive behaviour. The CMA launched its first labour markets investigation in 2022 and now has three ongoing: Two relate to allegations of wage fixing in the television production sector, and one relates to allegations of no-poach agreements in the fragrances sector. In 2023, the then UK government issued a proposal to limit the duration of noncompetes in employment contracts to three months. Although there has been no legislative progress since then, the new government may pick this up as part of its policy drive to enhance workers’ rights.
• U.S.: In the past decade, the federal U.S. antitrust agencies have taken a stricter approach to enforcement in labour markets, issuing guidance back in 2016 that warned that wage-fixing and no-poach agreements could be subject to criminal prosecution. Earlier this year, the Federal Trade Commission (FTC) adopted a sweeping prohibition of most noncompete clauses in employment contracts, deeming them to be unfair methods of competition. In August the District Court in Texas set the rule aside in its decision in Ryan LLC v FTC. The FTC has notified its intention to appeal and in the meantime continues to be able to bring one-off enforcement actions as it did prior to issuing the ban. In addition, labour markets have been a focus of private antitrust litigation in the U.S.
• Rest of World: Outside of Europe and the U.S., numerous authorities worldwide are ramping up enforcement efforts, conducting reviews and/or issuing guidance on competition issues in labour markets. Last month, the Brazilian competition authority opened an investigation into allegations of anticompetitive labour practices in the consumer goods sector and now also considers impacts of deals on labour conditions as part of its merger control reviews. Earlier this year, the Australian government published an issues paper on noncompetes and other restraints of trade between businesses and workers. Last year, Canada amended its competition law to criminalise certain no-poach and wage-fixing agreements. In 2022, the Turkish competition authority imposed fines of around €1.6 million for wage-fixing and no-poach agreements, equating them to cartel behaviour. The Singaporean government is expected to issue guidelines on the use of noncompete clauses in employment contracts later this year.

Key takeaways

Businesses may find it helpful to account for this increased focus on labour markets proactively in their competition compliance strategies. As labour markets are a relatively new focus for enforcers, this may require an overhaul of established practices and agreements that are already in place, including broadening the target audience of competition compliance training to include HR departments.

Particular attention should be paid to any clauses in standard contract templates and any arrangements (formal or otherwise) with competitors that could limit the movement of labour, for instance, a common understanding on noncompetes, no-hiring, no-poach, or non-solicitation.

In addition, it is important to consider the compliance risks associated with information exchange with competitors on labour issues (e.g., sharing information on salary or rates, benefits, or significant terms and conditions) as this alone could constitute an infringement.

Remember also that the boundaries of competition in labour markets may be wide and capture arrangements beyond traditional competitors: the central issue is whether companies are looking to hire from the same pool of talent, which may span multiple products and services.