Recent developments in European football (soccer) demonstrate that Europe is continuing to learn from the decades of legal experience acquired by professional sports leagues in the United States.

The Premier League salary cap

According to an article from Sportico, the English Premier League has approved a proposal to impose a salary cap starting with the 2025-26 season. The proposal will 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. If the cap had been in effect last season, it would have thus been equal to $653 million. Notably, the cap would apply not only to player wages but also to transfer fees and to fees paid to players’ agents.

The salary cap proposal follows years of increasing 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.

Salary caps are nothing new in U.S. professional sports. In 1984, the National Basketball Association was the first major American sports league to introduce a salary cap. The National Football League and the National Hockey League followed with their own caps in subsequent decades. Major League Baseball does not have a salary cap per se, but it does have a punitive luxury tax scheme that serves much the same purpose – to limit 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 the United States, 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 that 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, the trade union for soccer players in England, says it must be consulted about the proposed salary cap.

The Super League decision and the Lassana Diarra case

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

In December 2023, the Court of Justice of the European Union 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 its European member, UEFA, want to prevent the launch of a Super League that would see the best teams participate in an American-style closed system of competition – in other words, no promotion and relegation. When the plans for the Super League were announced, FIFA and UEFA, supported by outraged fans, threatened to suspend any teams or players who participated.

The relevant legal background concerns what American lawyers call “antitrust law” and European lawyers call “competition law.” European Union 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 (1958) does the same thing. Section 2 of the Sherman Act prohibits a party from abusing a monopoly position. Article 102 of the Treaty does the same.  

The crux of the Court of Justice 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 Court of Justice 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 Treaty, which recognizes the EU’s interests in “developing the European dimension in sport,” does not protect FIFA and UEFA from competition scrutiny.

Lassana Diarra. Another relevant case is a legal challenge by Lassana Diarra, a French player. Mr. Diarra alleges that certain FIFA rules violate EU competition law. More specifically, he is challenging rules that require, when a player terminates his contract early, the player’s new club to be financially responsible for payments to the prior club. In an April 30, 2024 advisory opinion, Advocate General Maciej Szpunar agreed with Mr. Diarra’s position, finding that such rules restrain players’ abilities to move between clubs.

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

As a result, the U.S. leagues turned to negotiating with their players to have their restrictions protected by the “non-statutory labor exemption.” Under this exemption, created by the Supreme Court, employers may be granted antitrust immunity even though they agree on rules that restrain the labor market – so long as those rules are negotiated with the employees’ unions. The EU also recognizes a non-statutory labor exemption.

For decades now, the non-statutory labor exemption has underpinned labor relations in American 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 1990s, 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.