The Premier League Continues Its American Sports Law Education

On the heels of the European Court of Justice’s December 2023 decision concerning the proposed “European Super League,” the Premier League’s possible 2025-2026 salary cap and a recent opinion concerning FIFA’s rules on player movement demonstrate that Europe is continuing to learn from decades of legal developments in American sports.

The Premier League Salary Cap

According to an article from Sportico, the English Premier League has approved a proposal to impose a salary cap on player spending starting with the 2025-26 season. The proposal is to be voted on at the league’s meeting in June.

The reported cap is to be equal to five times the amount that the lowest earning club received in television revenue. Last season, the cap would have thus been equal to $653 million. Notably, the cap would include not just player wages but also transfer fees and fees paid to players’ agents.

The league’s proposal follows years of growing player wages that have outpaced gains in revenue. Indeed, the U.K. government is considering a proposal to introduce a government body to regulate the sport as part of a stabilization effort.

The American Comparison

In 1984, the NBA was the first major American sports league to introduce a salary cap. The NFL and NHL followed with their own caps in subsequent decades. While MLB does not have a salary cap per se, it does have a punitive luxury tax scheme which serves much the same purpose – to restrain player salaries.

The absence of a salary cap in MLB speaks to a fundamental legal point with which the Premier League will also have to contend. In America, the National Labor Relations Act requires employers and unionized employees (like those in professional sports) to negotiate in good faith concerning the wages, hours, and terms and conditions of employment. The end results of those negotiations are collective bargaining agreements which comprehensively govern the league’s operations, including items such as player salaries, benefits, schedules, drafts, free agency, and much more. Thus, the absence of a salary cap in MLB is the result of the resistance to it by the MLB Players Association.

U.K. labor law, specifically the Trade Union and Labour Relations (Consolidation) Act 1992, provides for substantially the same process between British employers and trade unions. Not surprisingly then, the Professional Footballers’ Association (PFA), the trade union for soccer players in England, says it must be consulted about the proposed salary cap.

The Premier League did not respond to a request for comment concerning gwhether it believes it needs to negotiate the proposed salary cap with the PFA.

The Super League Decision

The uncertain legal footing of the Premier League’s proposed salary cap is the latest example of European soccer’s belated – or perhaps failed – effort to learn from decades of developments on the intersection of law and sports in America.

In December 2023, the Court of Justice of the European Union (CJEU) issued a ruling concerning the proposed “European Super League” which also reflected that Europe would do well to look across the pond.

The well-known background is that FIFA and UEFA, FIFA’s European member, want to prevent the launch of a Super League which sees the best teams participate in an American-style closed system of competition, i.e., no promotion and relegation. When the plans for such a league were announced, FIFA and UEFA, supported by outraged fans, threatened to suspend any teams or players that participated in the Super League.

The relevant legal background concerns what American lawyers call “antitrust law” and European lawyers call “competition law.” European Union (EU) competition law substantially tracks the U.S. Sherman Antitrust Act of 1890. Section 1 of the Sherman Act prohibits two or more parties from conspiring to unreasonably restrain trade in a market. Article 101 of the Treaty on the Functioning of Europe (TFEU) (1958) does the same thing. Section 2 of the Sherman Act prohibits a party from abusing a monopoly position. Article 102 of the TFEU does the same.

The crux of the CJEU’s decision was that EU sports organizations are subject to competition law and that their practices and rules must include “substantive criteria and detailed procedural rules for ensuring that they are transparent, objective, non-discriminatory and proportionate.” This determination is substantially similar to the rule of reason test in American antitrust jurisprudence, which weighs the anticompetitive effects and procompetitive benefits of restraints on trade. Whether FIFA and UEFA practices and rules meet the outlined test is something to be decided by a Spanish court on remand.

At the same time, the CJEU acknowledged that the unique nature of sports requires competitors to come together to agree on some rules to produce matches. Nevertheless, it ruled that Article 165 of the TFEU, which recognizes the EU’s interests in “developing the European dimension in sport,” does not protect FIFA and UEFA from competition scrutiny.

Lassana Diarra Case

Another relevant case is a legal challenge by Lassana Diarra, a French player. Diarra alleges that FIFA rules which require a player’s club to be financially responsible for payments to the player’s prior club where the player terminated his contract early are violations of EU competition law. In an April 30, 2024 advisory opinion, Advocate General Maciej Szpunar agreed with Diarra’s position. Szpunar recognized that such rules restrain players’ ability to move between clubs.

Look To America

The issues identified in both the CJEU’s decision and the Diarra case are well-trod for American sports lawyers. First, in the 1950s, in cases involving boxing and the NFL, the Supreme Court held that other sports leagues were not entitled to the anomalous antitrust exemption MLB had received decades earlier. Then, in the 1970s, the leagues persuaded courts that their unique nature meant that their restrictive rules prohibiting or limiting free agency should be viewed under the rule of reason, rather than considered per se illegal, i.e., illegal on their face. The leagues nevertheless had difficulty convincing the courts that these rules were reasonable.

Consequently, the leagues turned to negotiating with their players to have such restrictions protected by the non-statutory labor exemption. The non-statutory labor exemption is a policy crafted by the Supreme Court which grants antitrust immunity to employers who agree on rules that restrain the labor market so long as those rules are negotiated with the employees’ union. The EU too recognizes a non-statutory labor exemption.

For decades now, the non-statutory labor exemption has underpinned labor relations in America sports. In exchange for salary caps, player drafts, and limits on free agency, the players receive a guaranteed portion of league income (which is largely from television broadcast rights). After years of litigation concerning the bounds of the exemption in the 1980s and 90s, labor relations in American sports has been quite peaceful in recent years. It seems that European sports leagues could have saved themselves a lot of trouble by learning from these cases earlier.