U.S. Soccer answers to Senate over youth club compensation dispute

The U.S. Senate has gotten involved in the training compensation and solidarity dispute between U.S. youth clubs and U.S. Soccer.
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After its initial hearing with U.S. Soccer about cleaning up the game, the U.S. Senate turned its attention to American youth clubs’ quest for solidarity payments this week. U.S. Soccer had not responded publicly to the issue yet, but the federation had to answer in writing to the questions submitted by Senator Maria Cantwell (D., Washington).

Cantwell entered four questions for the record about the federation’s lack of adherence to Articles 20 and 21 of the FIFA Regulations on the Status and Transfer of Players. Any senator can ask questions for the record following a subcommittee hearing, and the questions act as a de-facto continuation of the hearing itself.

Last week, Crossfire Premier, Dallas Texans SC and Sockers FC Chicago officially filed complaints with the FIFA Dispute Resolution Chamber on the matter, claiming a combined $480,500 on transfers involving DeAndre Yedlin, Clint Dempsey and Michael Bradley. In each case, the complaining club claims Major League Soccer took the entire transfer fee for the player, including the 5% portion meant to be distributed as solidarity among their youth clubs.

With the wording of Cantwell’s first question to U.S. Soccer, it appears that one of Jozy Altidore’s former clubs in Florida also has a similar complaint against U.S. Soccer and MLS. The list of clubs that have complained publicly also includes La Jolla Nomads SC, Chicago Magic, Westside Timbers and Fullerton Rangers.

“MLS took the entire solidarity fee for the transfer of the U.S. soccer players including DeAndre Yedlin, Clint Dempsey and Jozy Altidore and paid none of it to any of their respective U.S. youth soccer clubs that were owed portions of the fees,” Cantwell’s first inquiry reads. “Please describe this process and explain why the solidarity fees are not awarded to youth clubs as called for in FIFA regulations.”

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In its answer to the Senate, U.S. Soccer draws on precedent including the only time MLS's structure officially came under scrutiny in the U.S., the landmark case of Fraser v. MLS in the U.S. District Court for the District of Massachusetts in 1996. It did not conclusively determine that MLS’s structure constitutes a single entity, which would exempt it from antitrust scrutiny, but it was not determined to be inherently anticompetitive, either.

The federation also mentions the Bosman case in the European Court of Justice in 1995, in which it was ruled that former clubs could not collect transfer fees on out-of-contract players, leading to the creation of free transfers. U.S. Soccer says the FIFA Regulations on the Status and Transfer of Players, established in 2001, partly grew out of that ruling.

“Consistent with the ruling in Bosman and given the antitrust laws of this country, U.S. Soccer agreed in Fraser that it would not enforce transfer fee or similar restrictions that FIFA might impose on the movement of players who were ‘out of contract,’” U.S. Soccer’s response reads. “Some aspects of the current FIFA RSTP may be considered applicable to out-of-contract players and, therefore, the Fraser order would apply in those circumstances.”

This is the confidential order that arose from Fraser that U.S. Soccer and MLS have said precludes American youth clubs from receiving solidarity payments. When requested by Crossfire’s lawyers in May, the federation would not provide a copy of the alleged agreement.

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“In addition, U.S. Soccer concluded, with the advice of outside counsel, that enforcing the RSTP with respect to the training compensation and solidarity payment mechanisms could be found to violate the antitrust laws of the United States given their potential impact on the mobility of players,” U.S. Soccer’s response continues. “Given recent European court decisions regarding player mobility—and in light of the growth of the sport of soccer in the United States, including the emergence since 2007 of the Development Academy, whose clubs often directly fund the training of elite players—that analysis is currently being brought up-to-date. But, U.S. Soccer has chosen not to enforce those aspects of the RSTP system that are of questionable legal validity in this country and which might expose U.S. Soccer to increased legal risk.”

Also, the federation claims that the FIFA regulations could come under fire in Europe in the near future as well.

“Over the past several years, several intermediate courts in Europe have determined that some methods of training compensation and solidarity payment mechanisms are unlawful and violate the [European Union] Treaty,” the response reads. “In other words, the decisions by the intermediate European courts are consistent with the conclusion U.S. Soccer reached regarding the potential for antitrust risk. This issue is likely to make its way back to the ECJ in the near future; as a result, the viability of the RSTP may be subject to significant scrutiny in Europe over the next several years.”

Crossfire lawyer Lance Reich, representing the club that has led calls for reform and whose home-state senator raised these questions for the record, told SI.com that the federation’s arguments have been inconsistent on the interpretation of the Fraser court order.

“It seems the USSF is distancing itself from the national application of the ‘Fraser order’ as the motivation for USSF’s conduct and aligning itself against FIFA in a larger fight to eliminate training compensation and solidarity fees,” he said. “Other youth clubs and academies around the world need to take heed of this.”

Cantwell’s second question reads: “If the USSF maintains that a consent decree in the case of Fraser v. MLS mandates that solidarity fees not be paid, please explain how that consent decree, which only USSF has signed and is bound by, denies any U.S. youth soccer club from receiving training compensation and solidarity fees yet allows the MLS to collect these same fees.”

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Training compensation is paid according to a flat rate and is designed to reimburse “costs that would have been incurred by the new club if it had trained the player itself,” according to FIFA regulations, while solidarity rewards clubs for developing the player and stimulates further efforts.

According to the regulations, 5% of the total transfer fee should be set aside for solidarity payments.

Clubs receive 5% of the solidarity money for each season between a player's 12th and 15th birthdays, which bumps up to 10% for each season between the player's 16th and 23rd birthdays.

“While not intending to speak for MLS, it is our understanding that MLS agreed to transfer the players referred to in return for a specific transfer fee based, in part, on U.S. Soccer’s long-stated policy not to enforce the RSTP solidarity mechanism,” the federation’s response reads. “As we understand it, if U.S. Soccer enforced the solidarity mechanism MLS would have demanded higher transfer fees, as this fee was agreed upon with the understanding that no portion of it would in turn be ‘passed on’ by MLS. Of course, there is no way of knowing whether any of the transferee clubs would have paid a higher transfer fee for any of these players and, if they would not, whether the transfer of these players would have occurred.”

Cantwell’s third question turns to the domestic game, asking specifically about American teams’ unwillingness to pay training compensation when signing first-time pros from domestic youth clubs. MLS has historically been unwilling to pay training compensation and solidarity to both domestic and foreign clubs when players are signed.

“How does U.S. law or the Fraser consent decree bar U.S. youth clubs from receiving training compensation from U.S. professional teams, especially with respect to scholarship players who received training from their U.S. youth clubs without paying a club training fee?” the question reads.

U.S. Soccer’s response doesn’t answer the question directly, but instead points out that the lack of adherence to FIFA policy extends across all professional leagues, domestic and foreign, avoiding discrimination.

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“We do note that U.S. Soccer’s decision not to enforce the RSTP is not limited to MLS and its players. Transfers of NASL players or USL players to foreign leagues are treated in the same manner,” the response reads. “In other words, U.S. Soccer’s decision not to enforce the RSTP applies is not applied in a discriminatory manner but applies evenly to all leagues and all U.S. players.”

Another possible resolution the U.S. clubs have proposed would be a unique, U.S.-based system that ostensibly follows FIFA guidelines but also takes into account the restrictions the federation believes it is under. Sen. Cantwell’s final question mentions the possibility of such a mechanism.

“If USSF has determined that U.S. antitrust law or the Fraser consent decree prevent the award of training compensation to U.S. youth soccer clubs within the U.S., why has USSF has not created or attempted to create a U.S. system for compensating U.S. youth clubs for their training role in U.S. youth players, both men and women?” the question reads.

U.S. Soccer, however, claims that it would not be possible.

“Any U.S. Soccer-imposed system applicable to the movement of players between and among clubs in the United States would be subject to the same legal risks discussed above (and perhaps additional risks),” the response reads. “Further, the stated goal of the RSTP system is to compensate amateur teams for their investment in player development. Historically, in the United States (as distinct from many countries elsewhere throughout the world), the cost of player training and development was typically borne by the families of young players, and in the case of top-level players, by U.S. Soccer itself. Development clubs have certainly grown in the United States over the past several years and we understand that Development Academy clubs are granting more scholarships than before—and that evolution will be one of the factors considered in the new legal analysis being conducted by U.S. Soccer’s outside counsel.”

That analysis could become clear within a month, as U.S. Soccer has called a meeting with many of the U.S.’s top youth clubs and other interested parties on Oct. 16 in Chicago. FIFA could also rule on the clubs’ cases before then, although the DRC has two months from filing to make a ruling.

“Crossfire and the youth clubs are very thankful for Sen. Cantwell asking these questions of the USSF and flushing out yet another theory on why there can be no training compensation or solidarity fees for the U.S. youth clubs,” Reich said. “We are going to hear FIFA’s opinion on this in the youth club DRC actions very soon.”