Who Owns Whom? The Slimy World of Third-Party Contracts in Soccer

In August 2006, budding Argentinian superstars Javier Mascherano and Carlos Tevez moved from Brazil's Corinthians to England's West Ham United. I remember when it happened, because it was so strange. I mean, West Ham? Although currently in fourth place in the English Premier League, West Ham was not and is not a European powerhouse. That they landed the year's two hottest South American exports wasn't just strange, it was impossible. Where'd the club get the money? Why did the players decide on West Ham? The answer to both questions is third-party ownership. The club didn't own the full rights to either player; a group of investors did.

Although there are several ways third-party ownership could work, it's probably best thought of as a loan. One or more investors buys the contract of a young player they hope will one day become a soccer icon. Those investors then "loan" their player to clubs. If his value rises, the investors can sell that contract to other investors and/or clubs—and profit.

Since the Mascherano/Tevez affair, third-party ownership has been a hot topic in world soccer. That deal was particularly shady, because nobody really knew who the investors were. Today, it is no longer permitted for clubs in England or France to employ players whose rights aren't owned exclusively by a club, but in other countries the practice is widespread. Stars like Chelsea's Willian, Manchester United's Marcos Rojo, and Borussia Dortmund's Henrikh Mkhitaryan, to name just three, all had their current contracts purchased from third parties.

UEFA, the governing body of European soccer, has been on a crusade for much of this season to rid the European game of third-party deals. FIFA has since declared it would like to ban the practice globally. Just this week, UEFA President Michel Platini signed a cooperative agreement with the European Commission that could eventually lead to the prohibition of third-party ownership in the European Union. How that prohibition will go into effect and what it will achieve remains to be seen.

UEFA's hardline on the issue is interesting for a number of reasons. For one, it's hard to say exactly how prevalent the problem is in Europe. Manuel Veth, a PhD researcher in history at Kings College in London and an expert on Eastern European soccer, thinks the issue is blown out of proportion. "I think it's actually less pervasive than people think it is," he said, noting that most domestic payers in Eastern Europe are on club-owned contracts. (VICE Sports asked UEFA for estimates on the prevalence of third-party contracts in Europe and was told the information was "unavailable.")

For another, the question of whether third-party ownership is really a problem for European soccer isn't as simple as Platini would like you to believe. Who benefits, competitively, if third-party ownership is done away with? The big clubs that now have to cover the entire cost of a multi-million dollar transfer? The little clubs that will now find it more difficult to access high-level talent? Sharing liability with investors might actually increase competitive parity.

Lastly, UEFA is making a lot of noise about a problem it might not actually be able to solve, at least not entirely—not without the support of national federations and FIFA. "It's like if you ban prostitution," said Veth. "It's still going to go on." The analogy is not a terrible one. There are two ways a government can handle prostitution: either ban it outright and chase after offenders, or bring it into the mainstream by regulating it and trying to make it safer. Similarly, with third-party ownership, UEFA can ban it and figure out a way to punish offenders (by, say, restricting them from European competitions like the Champions League), or by regulating it and trying to make it safer.

In the case of third-party ownership "making it safer" would mean addressing the conflict of interests that could arise if investors own rights to competing players. In such a situation, as Platini noted earlier this week, "the nightmare of match-fixing could rear its ugly head."

Soccer should absolutely do whatever it can to combat match fixing. But in its present form, in which names of investors are sometimes undisclosed, regulation might be easier to enact—and result in a higher rate of compliance—than playing whack-a-mole with an outright ban. Veth agrees: "The system isn't the problem. It's the people who are behind it who are really the question mark."