“Diarra decision” against FIFA shows: Labor markets are the focus of European competition authorities
In its “Diarra decision”, the European Court of Justice (ECJ) has overturned certain transfer rules of world football’s governing body FIFA. The background to this is the case of former French international Lassana Diarra. Following this decision, companies outside of professional sport should also review their approach to wage agreements and non-solicitation agreements in order to avoid coming into conflict with the competition authorities.
Previously, the FIFA Regulations on the Status and Transfer of Players (RSTP) have allowed a player to terminate his contract without cause but obliged him to pay compensation in this case. The special thing about these transfer rules: According to Article 17 of the RSTP, the player’s new club is also liable for such compensation. In addition, the new club of the professional, who has terminated his contract without cause, faces further sanctions under the FIFA rules.
However, the ECJ has now ruled that these transfer rules restrict competition for players between soccer clubs and violate EU antitrust law (decision of October 4, 2024 - C-650/22): In the present case, the French player Lassana Diarra had unilaterally terminated his contract with the Russian Premier League club Lokomotiv Moscow and was subsequently sued by the latter. FIFA subsequently imposed a fine of ten million euros with reference to the RSTP and threatened clubs that wanted to sign the professional with further sanctions. Diarra successfully challenged this practice before the ECJ.
EU Commission: Non-solicitation agreements and salary agreements violate antitrust law
The ECJ’s Diarra ruling emphasizes that antitrust law is also becoming increasingly important on the labor markets and is the focus of competition authorities. The European Commission recently reiterated that it considers non-solicitation agreements and salary agreements to be in breach of antitrust law.
Non-solicitation agreements
Non-solicitation agreements are agreements between companies not to poach employees from one another. Even if the Diarra case does not directly concern a non-solicitation agreement, the FIFA transfer rules have the indirect effect of a non-solicitation clause: de facto, clubs will not sign players who have terminated their contract without cause due to the disadvantages they might face.
Salary agreements
In the case of salary agreements, companies agree among themselves to set wages or other remuneration and benefits. As a result, employees receive the same or a comparable salary at these companies and therefore have at least no incentive to change employers.
Both non-solicitation agreements and salary agreements generally violate European Union antitrust law. This is because they pursue the anti-competitive goal of preventing employees from switching freely between competing employers. Non-solicitation agreements can only be permitted in very exceptional cases, such as M&A transactions. The main “victims” of wage agreements and non-solicitation agreements are the employees.
Legal consequences: Violations may result in fines and claims for damages
In the case of non-solicitation agreements and salary agreements that violate antitrust law, companies face considerable disadvantages in the form of severe fines and claims for damages. The Diarra case involves claims for damages in the millions. Finally, such agreements and arrangements are null and void.
National authorities could follow suit – check existing and future agreements now
The Diarra decision and the above-mentioned recent statements by the European Commission show that the competition authorities are now also focusing on the labor markets. It can be assumed that national authorities – such as the German Federal Cartel Office – will follow suit. Companies should therefore review their approach to non-solicitation and salary agreements. Intended non-solicitation agreements should be examined for their admissibility on a case-by-case basis.
