Third Party Ownership: First Order of Business


My white paper is about the practice of third party ownership in the game of soccer and the need for it to be eliminated.  Third party ownership is when an outside investor purchases a stake in a player’s economic rights.  Once that player is transferred, the third party owner get his percentage worth of the new transfer fee. For example, I could purchase a 50% stake in a player in Brazil for $1 million.  After a couple of years of performing well, he could be transferred to another team in Europe for a transfer fee of $4 million.  Since I have a 50% stake, I would receive $2 million dollars of the $4 million.  My initial investment of $1 million has grown by 100% and provided me with superior returns.  This sort of trading of a player’s value is interesting, but it causes trouble for the sport.  Recent controversies and new rules being implemented have put the practice on the chopping block, and I am recommending UEFA, Europe’s governing body of soccer, should be the first to ban the practice outright.  The allowance of third party agreements does not support the integrity of the game, and puts the sustainability of teams, clubs, and competitions in jeopardy.  If you are a soccer fan, this paper will inform you of some of the behind the scenes issues with third party ownership you probably never knew existed.  You will also be able to learn about some of the new financial regulations occurring in Europe and some of the implications they may have.  Overall, third party ownership is a controversial practice that seems to benefit some upfront, but causes more harm in the long run.

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Third Party Ownership in Soccer: Fair or Foul?


The world of sports has been one of the most competitive arenas for hundreds of years.  Nothing defines competition better than pinning two teams against one another on a field with diametrically opposed objectives, letting them showcase pure their athleticism in order to attempt to strategically achieve victory.  The intense nature of competition within sport has led teams and clubs to resort to any legal means necessary to gain a competitive advantage over the others.  The sport of soccer, commonly known overseas as football, is the most popular sport in the world, which even furthers the need and desire to become known as the most dominant team across all leagues.  It is a wide held belief that teams that are better off financially have an advantage against smaller clubs that lack the funding to stay competitive.  Teams with large budgets can actively recruit high-profile players, footing the bill with no problem.  Smaller teams, on the other hand, may find it difficult to come up with the finances to purchase big name players, and as a result, cannot afford to remain competitive.  It is this reason that many teams resort to certain financing techniques, one of which is known as third party ownership.  I will delve into the details of this practice in this piece, and go into even further detail as to why it has become known as highly controversial.  I will then look at the practice from differing ethical perspectives, explaining how each school of thought would view the concept of third party ownership.

            Third party ownership in soccer is when an investor purchases a stake in the economic rights of a player in hopes that the player’s value will increase and provide a high return on investment when the player is transferred to a different club.  To put it in easier terms, I will walk through the process that an investor goes through.  Investors look for players in professional leagues that they view have great potential to grow in value.  The investor then pays the club that owns the player a certain amount of money to receive a percentage stake in a player’s economic rights.  For example, if I was interested in player X, I could pay his club $1 million dollars for a 50% stake in the player.  Player X then has back-to-back seasons of superior athletic performance, and as a result, his value has skyrocketed.  Now, in order for me to capitalize on my investment, player X must be transferred.  A transfer occurs when the player is still under contract with his original club, and is then purchased by a different club for a certain transfer fee.  Without a transfer, my initial investment disappears, and I make nothing.  For argument’s sake, a new club shows interest in player X and the two clubs agree upon a transfer price of $5 million.  Because I have a 50% stake in the player, I will receive $2.5 million of the $5 million, and the club who originally owned player X receives the other half.  As an investor, I was able to grow my initial $1 million investment into $2.5 million by taking an active bet on the development of player X.  The obvious question that comes next is why would a club agree to these terms?  “Many clubs, particularly in southern Europe, are struggling to raise revenue and obtain bank loans following the 2008 credit crisis and resort to transfer investments for cash… Clubs get a quick infusion of money but sacrifice a bigger payday a few years later, when they negotiate the sale of the player and share the transfer fee with an investor” (Duff).  As mentioned before, smaller clubs with financial limitations need to find creative ways to raise the appropriate cash to stay competitive.  They can use this flow of cash to purchase other players now, without having to wait to transfer their current players.  The investors in this situation are generally investment funds, corporations, or wealthy individuals, but even some sports agents have been partaking in this practice with their own players.  “Some 15 percent of agents own stakes in players they represent, according to a survey of 269 agents by CIES” (Duff).  The practice as a whole has been under scrutiny over the past few years, and some people and organizations have called for the prohibition of third party ownership across the world.

            Before I dive into the ethical schools of thought on the practice, it would be helpful to understand why certain people view the practice as unethical and wrong to begin with.  UEFA, the Union of European Football Associations, has been making their stance on the issue well known over the past few years, citing four main reasons they find the practice needs to be eliminated.  First of all, it should be noted that the top division in both England and France have already made the practice illegal for clubs, but UEFA is calling for FIFA, the Fédération Internationale de Football Association, to ban the practice across all professional soccer.  The first reason UEFA cites is that it is wrong to purchase the economic rights to a human being, and then to trade that person like an asset or stock.  Secondly, conflicts of interest surely arise when investors own stakes in multiple players from various teams.  There would be reason for these investors to use manipulation in order to achieve desired outcomes, and UEFA and FIFA both agree that the sport can do without manipulation.  An additional reason third party ownership is being called into question is the practice facilitates a culture of multiple transfers and contract instability.  Because money is only made when a transfer actually occurs, there is immense pressure for these trades to occur.  The last reason UEFA cites is that it goes against the idea of financial fair play that FIFA is trying to promote (UEFA).  “The risk here is that financial fair play will be fundamentally distorted because the clubs that use third-party ownership to defray costs will have an unfair advantage over those prohibited to do so—like English and French teams” (Marcotti). It is for these main reasons that many have deemed third party ownership a controversial and unethical practice, but looking at it from a few ethical perspectives, there could be some differing opinions on the matter.

            Depending on the ethical mindset third party ownership is viewed from, it can be deemed either ethical or unethical.  The conflicting views of consequentialism and ethical egoism versus Kantian ethics display the main differences well. Consequentialism “seemingly demands (and thus, of course, permits) that in certain circumstances innocents be killed, beaten, lied to, or deprived of material goods to produce greater benefits for others. Consequences—and only consequences—can conceivably justify any kind of act, for it does not matter how harmful it is to some so long as it is more beneficial to others” (Alexander).  In basic terms, the ends justify the means.  Ethical egoism determines “an act is morally right if and only if, of all available acts, it provides the greatest balance of benefit to harm for the person performing the act” (Humber, 18).  Advocates of third party ownership could morally justify the practice through these two schools of thought.  Those who oppose third party ownership could present an argument from a Kantian ethics perspective.  There are three main categorical imperatives that Immanuel Kant presents and they are as follows:

  1. Act only on maxims which you can will to be universal laws of nature.
  2. Always treat the humanity in a person as an end, and never as a means merely.
  3. So act as if you were a member of an ideal kingdom of ends in which you were both subject and sovereign at the same time. (Bowie, 4)

The first two portions are the ones that reveal third party ownership as an unethical practice.  Looking at the previous four reasons cited by UEFA, we can look at how each school of thought would view the issues at hand.  Taking an economic stake in a human being as to grow personal wealth is the first item to look at.  Consequentialists “specify initially the states of affairs that are intrinsically valuable—often called, collectively, ‘the Good.’ They then are in a position to assert that whatever choices increase the Good, that is, bring about more of it, are the choices that it is morally right to make and to execute” (Alexander).  In this case the Good is available capital to keep them competitive, and allowing investors to purchase a percentage of a human being’s economic rights is just a means of doing so.  Ethical egoists would look at this from the investor’s perspective and say that because the investor is able to purchase a stake in a player to increase their own wealth, the mere increase in personal capital makes the action ethical.  The conflicting Kantian view is based on the second principle of which he forms his ethical thoughts.  In this case, investors and clubs are not treating the person as an end, and are only treating them as a means.  Using a person to gain capital is treating the person like an asset in a stock portfolio.  It also seems to break the first rule.  Theo van Seggelen, secretary-general of the International Federation of Professional Footballers, has been quoted as saying “‘there’s not any other profession in the world where investors can buy stakes in a human being’” (Duff).  It would not be acceptable to own the rights to someone in a universal context, and when combined with the idea that investors and clubs are using a human for financial growth, it is clear that a Kantian ethicist would view this practice as unethical.  The idea of conflicts of interest and manipulation occurring as a result of third party ownership is also looked at differently between the schools of thought.  Once again, consequentialists and ethical egoists would determine the manipulation and conflict of interest as merely a byproduct of creating better financial positions.  Kantian ethics would think otherwise.  Right now, third party ownership is legal in most leagues, and “FIFA [says] that investment of a third party is now only illegitimate if and when the ‘third party has the right to influence the club’s choices in employment and transfer-related matters’” (Downie).  Investors can claim they have no influence over transfers, but looking into the contracts they have with clubs proves otherwise.  Some contracts can be structured in such a way that the “investment may automatically switch to another player if a contract expires on [the investor’s] footballer, and teams may pay a penalty if they don’t move an athlete before his contract ends” (Duff).  The fact that a team could incur a fee when not transferring a player undoubtedly seems like influence over a club who is already in a poor financial situation.  When it comes to agents owning stakes in their own players, they too are faced with a conflict of interest because they may attempt to force a transfer when it may not be in the best interest of the player.  Once again, Kantian ethicists could view the players being used as a means to an end.  The last two reasons UEFA cites can be grouped together for argument’s sake.  Creating contractual instability and going against the idea of financial fair play can be viewed in the same light from ethical perspectives.  Once again the consequentialist and ethical egoist would not concern themselves with the semantics of the rules, so long as they are achieving their desired goal and improving their personal situation.  Clubs want more money to stay competitive and investors want more money on their investments, and creating this unstable contractual environment while creating an unfair advantage is not in the basis of their decision making.  From a Kantian point of view, third party ownership creates these outcomes, and these outcomes are not desirable outcomes for a universal law.  Without contract stability, contracts could become an irrelevant practice that means nothing.  A Kantian ethicist would claim “if a maxim that permitted contract breaking were universalized, there could be no contracts (and contracts would cease to exist). No one would enter into a contract if he or she believed the other party had no intention of honoring it” (Bowie, 5).  This can be related to third party ownership because players are entering into contracts that rarely reach their expiration, and therefore seem irrelevant and self-defeating.  A Kantian view would also see going against financial fair play could not be universalized.  Giving yourself an advantage over others that cannot partake in the same process could not be a rule followed across all aspects of life, and therefore would break the categorical imperatives.  Depending on which ethical perspective you choose to view third party ownership, you could view the practice as ethical in achieving a desired goal, or unethical in the process of which it occurs.

            As the organizations within soccer debate this topic, it is important for them to view third party ownership through different lenses.  It is a widely contested topic, and before any decisions on its legality can be made, all points of view should be taken into consideration.  From a small club’s point of view, they may feel they need to practice it in order to keep up with clubs who naturally earn more money through ticket sales, endorsements, and television contracts.  From other clubs’ perspectives, they may see it as an unfair advantage for teams to raise capital to purchase players they would not have been able to in the first place.  The investors in this practice generally view third party ownership as a positive, hence their participation.  They see the potential for high gains in short time horizons, and are not as concerned with the effect it has on the game of soccer.  They simply treat the players as an asset in a portfolio.  The players, like the clubs they play for, may have a conflicted view on the practice.  For one, they could benefit from investors looking to increase their transfer value, and as a result they could benefit directly from the move.  On the other hand, they may not want to be transferred to a specific team or at all, and could have their own agents pushing them in the wrong direction for the development of their career.  In conclusion, third party ownership is a hotly debated issue that, depending on which ethical perspective is taken, could be deemed either ethical or unethical.

Football and Soccer. Is it the same game?


I have been a huge fan of soccer since the very beginning of my conscious life. I know it as football – the way they call this game in Europe. So, I might accidentally, as a matter of habit, be using “football” instead of soccer sometimes – please excuse me if that confuses you. Soccer remains my favorite sport, though I was doing many other kinds of sports: basketball, volleyball, tennis, ping-pong, swimming, skiing and skating. It is the only sport I watch and keep track of. I absolutely love this game that has a lot of elements interesting to me: flow of the game is often very unpredictable; there are so many strategies and tactics, each having different set of requirements; a significantly weaker team can turn the tides against the stronger one and etc. Watching football closely, I could not help noticing issues it has.

Ethical behavior as a concept does exist, however players and even officials break this concept easily in many cases. Match-fixing is one of the issues that occur quite often, especially in Italian football. Italy has a long match-fixing history with Calciocaos – the loudest fixing scandal with severe consequences for one of the teams – at the pinnacle. Calciocaos scandal ended with Juventus, one of the great teams in football history, being kicked to lower division, from Series A to B, for one season, which costed them two titles, reputation and a very talented player. Despite facing huge risk of punishment, teams keep practicing match-fixing. In fact, Italian league (Series A) is under investigation due to recent scandals.

FIFA Executive Committee Meeting

Football officials are not saint either. FIFA, association that is supposed to deal with controversies, corruption and unethical behavior, is rotting from inside. There was a huge bribery scandal involving FIFA chiefs last year. How can be ethical practices enforced when governing body is corrupt itself? How do we know they are not involved in the match-fixing practices?i

Those are the larger scale problems. Now I would like to talk a little about football issues, not as global, but still important. Soccer has instant-replay prohibited for some reason. Some say it adds more drama, randomness and emotional element. Others say that not having instant-replay allows unfairness and foul play. I personally think, that instant-replay is not that important, though would it be present, no unethical behavior would not have been so common. Here is a compilation of obvious foul plays.

I also wouldn’t like to watch a replay and waste 30 sec just for teams to check for offside – that would partly take the joy of watching the game. Besides, soccer also has a special place for referee, who is just as important as players are, has reputation, skill level and qualification. Implementing instant replay would make all those referee qualities mentioned above meaningless, since it would always be possible to just look at the replay. Anyways, in my opinion, if a team is really better than the other one, then the former team will win despite all the dirty plays from the latter, as in the 2010 World Cup Final.

I have actually suffered from foul play. Lack of instant-replay is only one part of the problem. Rules do not cover all possible situations in the game. It is quite difficult to determine whether a foul is hard or soft. Moreover, soft fouls do ruin the game, however it is not right to punish heavily if mistake was unintentional. People abuse this fact and sometimes play dirty. Some even adopt the dirty play style and foul just because of a habit. I have been injured once due to the “soft” foul.

Even though I have been criticizing football, I still do love that game. Soccer would have been better and there would be no need for instant-replay or other measures, if everyone was playing clean.

In the end, I would like to show a Youtube video of Maradona’s Hand of God, where Diego Maradona – legendary Argentinian player – scores a hand-ball and it got counted. Another video is dedicated to Paul Scholes – he plays for English national team and Machester United at the moment – who unsuccessfully tried to copy Hand of God.

No Harm, No Foul?


Luis Suarez Intentional Handball in 2010 World Cup

There are some actions performed during the course of a game that could be considered “unethical” by some people, but as an athlete I feel different about them.  As some of you may know I am a soccer player.  Over the many years of playing the sport I have developed many different skills and strategies that I continue to develop each and every time I play.  One of the concepts I have picked up from several of my coaches was the notion of a “smart foul” during a game.  First of all, fouling is technically breaking the rules of the game.  You are supposed to play within the rules, and it would seem unethical to some to purposely do otherwise.  The rules are there to be followed and under no circumstance is breaking them the right thing to do, right?  This argument gets a little gray with the idea of a smart foul.  A smart foul, in the game of soccer, can happen in hundreds of different situations.  Sometimes you do something as simple as delay a free kick on purpose so your team can get back in numbers.  I would say the most common smart foul occurs when a defender purposely grabs, trips, pushes or nudges the offensive player around midfield, as to prevent a fast break, numbers down situation, or dangerous 1v1.  There’s even a pretty common saying for when you attempt to tackle someone coming at you: “If you don’t get the ball, get the man.”  This is saying if you miss hitting the ball on a slide tackle, at least catch the opponent in the leg so there’s a foul and he “doesn’t” beat you.  It’s strategy, albeit an old-school one, but it’s still said today.  I have done all of these past examples; it’s the nature of the game.  It’s not like I wasn’t penalized for my actions.  There were fouls called and cards given, and the proper procedures were followed.  I accepted my consequences with open arms.  Is that unethical?  You tell me.  I think it is part of sports.  The objective of a game is to beat the other team, which means drawing up and implementing a better strategy than them.  Sometimes the only thing to do to preserve the win is to break a rule.  If the rule is broken and there is no severe physical harm done in the process, then I consider it okay to commit those fouls for the sake of the win.  This brings me to a very famous example of a player purposely breaking a rule to save a win.

In the quarterfinals of the 2010 World Cup, Uruguay squared off with Ghana.  The game found itself in extra time and the score 1-1.  There was only a few seconds left in the match, and if the extra time ended as a tie, there would be a penalty shootout.  If someone were leading at the conclusion, that team would advance.  So with just mere seconds left this play happened:

What you just saw was Luis Suarez of Uruguay purposely saving the ball of the line with his hands, something only the goalie is allowed to do.  The ball was CLEARLY going into the net until it met his fists of fury.  The ref promptly called the penalty kick and issued the standard red card for the intentional handball.  Luis Suarez was ejected from the game, as is protocol for a red card, and Ghana was awarded the proper penalty kick.  All Ghana had to do was put away the PK and they would have advanced.  PK’s are scored about 85% of the time.  If you are Ghana you are upset because the 100% goal was illegally saved and replaced with an 85% goal.  Lo and behold, Ghana MISSES the penalty kick and the game goes into penalty kicks to decide the winner.  As fate would have it, Ghana lost the PK shootout and was eliminated from the World Cup.  Suarez got a lot of flack for his move on the line, but as a soccer player, I saw a player who sacrificed his playing for not losing.  He saved a sure thing, giving his team a chance to survive, and survive they did.  I know a lot of people will disagree with me and say the play was awful and he should be ashamed but I understand the level of competition sports can bring out.  I do have a line.  As long as no one is actually hurt (and by that I mean in more pain than a normal foul in the course of the game would cause) then these fouls are being used strategically and not for any harmful reason.  I also wouldn’t consider it cheating because fouls are built into the game.  They are expected to happen and as long as they are properly penalized, then the game is being played as it should.

I’d be interested in hearing what some of you think about the Suarez play or about intentionally fouling in general.  It would be interesting to see what some of the other athletes in the class would say in comparison to those who may not play sports.  Just to see what some people think, here’s a poll:

 

Strategy or Ethics?


My first present from my father was a soccer ball. I was two years old, and had just begun to walk. I joined my first soccer team at age three, and from that moment on until my senior year of high school, I went to soccer practice every single weekend. When I was little, it was all about the fun of the game. That was until I joined my first travel soccer team, The Yorktown Amazons.

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We were eight years old, and my father was our coach. I played on the same team with the same girls for the next ten years of my life. As soon as middle school rolled around, team parents were already starting to talk about college scholarships. All of a sudden we had enormous pressure to perform well in tournaments. We went on to win first place in countless tournament for the next few years, and became classified as a Northeast Region 1 Premiere team. This was a huge achievement. After clinching some more wins, we had succeeded in becoming nationally ranked.

However, the road to glory was not as easy as I just made it sound. In the game of soccer, just as with life, unethical behavior can sometimes give you an advantage. For example, I know from experience that it is fairly easy for a team member to fake an injury or a foul an opposing player in order to get the ball back. For instance, pretend for a moment that you are a defensive player. You are one-on-one with an offender on the opposing team. They are heading for the goal and you fear that they will pull ahead of you. You know that your team will have a better chance of preventing a goal if the opposing team has a free kick rather than a wide open shot in front of the goal. What do you do? Foul her outside of the box. This way, your team can recover back towards the goal, and set up a defensive strategy to increase our chances of getting the ball back. As long as you do not trip her inside of the box, you will usually not receive a yellow or red card and get thrown out of the game. With the enormous amount of pressure that we carried on our shoulders, these type of fouls were commonplace (among others). There are countless “strategies” such as this that people use in the world of sports to gain advantage in a game. But where is the line drawn between strategy, and poor ethical behavior?

During my senior year, I was tripped by a member of a different team while playing in the State Cup Tournament final. I completely tore through my hamstring. The same “strategies” that my team had used on others, had been used on me. I was done. I would never be able to play in another soccer game with my team. I would never be able to play Division 1 soccer. Everything that I had worked so hard to accomplish meant nothing now. I had given up hundreds of weekends (seriously hundreds) to go play in tournaments down in Virginia, North Carolina, Rhode Island, Pennsylvania, etc. I would never again be as fast or as strong as I had once been. I was completely crushed. All of this pain stemmed from one personal foul against me on the field. I couldn’t help but wonder, had I done this to anyone at some point? I felt terrible.

On another note, I feel that there are no sports organizations that are perfect models for ethical behavior. Every organization that I can think of has had some scandal or debate about their behaviors.  For example, in the sport of Jockey, some horse owners have been known to break horses legs if they are not performing well enough, or even murder the horses, in order to collect insurance money and purchase a new young horse. Is this ethical? NO!!!!! It actually disgusts me that animal cruelty such as this exists at all.

It took me forever to locate this clip, but I finally found it. I remember when I was younger and saw this for the first time, I was completely shocked. It has been burned into my mind ever since. In the following clip we see pro soccer player, Tab Ramos, taking an elbow to the head. Would you classify this as “strategy” or “unethical behavior”? Why?