The cases for and against compensating youth clubs

By Mike Woitalla

When Manchester United paid a transfer fee of $10 million to Bayern Munich to acquire 30-year-old Bastian Schweinsteiger in 2015, a small German club named TSV 1860 Rosenheim received $42,000.

Schweinsteiger joined Bayern Munich at age 14 from 1860 Rosenheim. Because Rosenheim contributed to Schweinsteiger’s development after his 12th birthday, it was entitled to a portion of the transfer fee Manchester United paid Bayern Munich, as stipulated by the FIFA’s “solidarity mechanism.”

When Tottenham Hotspur paid a transfer fee of a reported $4 million to acquire DeAndre Yedlin from the Seattle Sounders in 2014, Crossfire Premier, for which Yedlin played before joining the Sounders’ youth program, did not receive a solidarity payment.

That’s because MLS doesn’t adhere to FIFA’s Regulations on the Status and Transfer of Players (RSTP) that stipulate solidarity payments -- and U.S. Soccer does not enforce RSTP.

In June 2015, Crossfire Premier, Dallas Texans SC and Sockers FC Chicago filed complaints with the FIFA Dispute Resolution Chamber (DRC), claiming a combined $480,500 on transfers involving Yedlin, Clint Dempsey and Michael Bradley. Crossfire claims it’s entitled to a $60,000 share of the Yedlin transfer fee. (About $20 million have changed hands during the pro club transfers of Dempsey, who played youth ball for the Texans.)

Non-MLS youth clubs have long lamented not receiving solidarity payments or training compensation as stipulated by RSTP. The frustration no doubt ramped up with a scenario such as the Yedlin move to English club Tottenham, which sent 75 percent of his transfer fee to the Sounders (the other 25 percent went to MLS), while Crossfire got nothing although Yedlin spent more time with Crossfire than with the Sounders’ youth program.

The latest move in the quest for compensation came when Crossfire, the Texans and Sockers filed a class action lawsuit in a federal court in Texas against the MLS Players Union (MLSPU).

Here are some key questions and answers about the issue:

Why haven’t U.S. youth clubs received solidarity contributions or training compensation?

Various reasons have been given, including child labor laws, ruining non-profit status, NCAA eligibility and anti-trust. Lawyers for the youth clubs say none of those are applicable.

(You can read U.S. Soccer’s answer to this question at a July 2015 U.S. Senate hearing HERE.)

Why should U.S. youth clubs, which charge kids thousands of dollars in fees, expect to be compensated?

The clubs that have appealed to the DRC and are a part of the class-action suit cite that the players in question were scholarshipped. And that by receiving compensation for such players, they will be able to increase the amount of financial aid to other players.

What’s the difference between the solidarity mechanism and training compensation?

The solidarity contribution is a percentage of a transfer fee that goes to any club that has contributed to the player's “education and training” from the player’s 12th to 23rd birthday. If, for example, a player played with a club from age 12 to 18 and moves to a professional club, then transfers before the expiration of his contract to another club for $1 million, the youth club is entitled to a solidarity contribution of $50,000. If the player played for various youth clubs, those clubs would split the solidarity payment according to the RSTP formula.

FIFA’s Regulations on the Status and Transfer of Players:

Training compensation is a fee from the first professional club that signs a player to the youth club(s) the player played for after his 12th birthday. It is also paid each time "a professional is transferred between clubs of two different associations" before the end of the season of his 23rd birthday.

Why did the youth clubs sue the MLS Players’ Union?

The youth clubs cite that the MLSPU has threatened to bring an antitrust suit against the US Youth Clubs for attempting to obtain solidarity fees and training compensation. The youth clubs are seeking declarations from the court that they “can lawfully receive solidarity fees and training compensation from professional soccer clubs for international US player transactions … [and that] the implementation of a system of solidarity fees and training compensation similar to that of the FIFA RSTP for player transactions within the US is also lawful and not a violation of US antitrust law.”

Why would the MLSPU be against solidarity fees and training compensation?

Because it believes that such fees would come out of the earnings of the players it represents. MLSPU executive director Bob Foose told ESPN FC’s Jeff Carlisle that, "The effect of those payments is to take money and opportunity away from our players. If you were to implement this system, it would make it even harder for those players to get jobs overseas because it would add a tax on [their transfer]. And when you add a tax, it primarily -- if not totally -- comes out of the players' pockets.

"In the case of lower-profile players, it makes it not worth it to sign an American player at all because for guys that aren't on the high end, you're talking about fees that are 300-400 percent of what the players would get paid or their transfer fee.”

Does the MLSPU have a point?

On training compensation, if MLS, NASL or USL clubs were forced to pay in a similar manner to major European clubs, this could make them think twice about signing unproven U.S. talent. For example, MLS teams signed 2016 second-round draft picks at $51,000 salaries. If they had to shell out another $50,000 in training compensation, would they even bother giving such players a chance?

However, lawyers for the youth clubs say they are not asking for the kind of training compensation a Bundesliga club, for example, would pay a youth club in Germany, but that the idea is to hammer out a training compensation plan appropriate for the U.S. soccer market.

“The youth clubs were very clear to articulate they view the world $2,000 at a time for money coming into the club, because every found $2,000 is giving some young kid a fee scholarship at the bottom level of the club,” said attorney Lance Reich after an October 2015 meeting U.S. Soccer hosted that included representatives from MLS, the MLS Players Union, NASL, USL, youth clubs and the U.S. Soccer Development Academy.

What would be the best way for this to play out?

There have been reports of foreign clubs ready to send funds in accordance with RSTP to U.S. youth clubs, who never receive them.

One solution would be to separate the issue of compensation from foreign clubs from the issue of training compensation from U.S. pro clubs to U.S. non-pro youth clubs.

Indeed, that seems to be the approach from the youth clubs. A statement from the youth clubs provided by Texans’ president Paul Stewart reads:

“Our primary claims are for solidarity contributions, which will normally only be about 2-3% of the transfer fee under the FIFA system. Right now, MLS is simply keeping this money (or the foreign professional club is keeping it when a player is transferred to the U.S.).

“Regarding American players first signed by a foreign club, those clubs are being told that they don't have to pay training compensation because of U.S. antitrust laws. We think that if the antitrust issue is removed, they will be fine with paying training compensation without impacting American players' compensation, like they do with players from almost every other country in the world. However, when necessary we would always reduce or waive training compensation if our former player needs that help to be signed by a foreign club.”

10 comments about "The cases for and against compensating youth clubs".
  1. Ric Fonseca, July 7, 2016 at 11:20 p.m.

    Sorry folks, in danger of sounding overly cynical over this brouhaha stuff, all I can see happening here is that the so called anti-trust laws, which may also include the NCAA & its cohorts, at al, will only see this opportunity to milk the proverbial cash cow. Coupled with this is the opportunistic established clubs, e.g. SD Nomads, The SoCal Blues, and others in other states to see an opportunity to get more dinero into their coffers. My introduction to the club scene some three decades ago, showed me the writing on the wall when in my area I began to see the writing on the wall with the influx of so called-former Euro (western and eastern regions) and Latino "pros" wending their way to the local clubs. The thing is that this scenario so aptly described above by Mike W, was not even in the picture, but now that we're beginning to produce some damned good talent, some enterprising soul saw the opportunity to raise a bloody stink. That the MLSPU is being sued, now this is where I smell a rotten rat, nor in Denmark but in our wonderful shores. Face it folks, I am a union animal (can site stories of my early union involvement with the teacher's union - via my aunt and uncle -) but for crying out loud, pilgrims, leave the Player's Un ion the hell out of it. Lastly, I betcha that the liars, I mean lawyers, helping lead the charge aren't even members of labor or guild unions, etc... (just sayin') but for some unscrupulous guys out there helping lead the charge, to me it is all a matter of getting in on some of the action, read this, m-o-n-e-y, and nothing else, For crying out loud, they don't even give a crap other than how to get that piece of action!!!

  2. Bob Ashpole, July 7, 2016 at 11:45 p.m.

    I see problems too, but of a different sort. If youth clubs can receive training compensation and solidarity payments for players, I fear that it will bring out the worst kind of recruiting practices, including under the table "gifts." Clubs will be more concerned about recruitment than development.

  3. Fire Paul Gardner Now replied, July 8, 2016 at 1:34 p.m.

    Seems to me they would still be interested in development because they only make money if the player "makes it" and is good enough to merit a transfer fee at the professional level.

  4. cony konstin, July 8, 2016 at 1:46 p.m.

    First of all is the MLS part of the USSF? Yes. Is USFF part of FIFA? Yes. So that makes the MLS, USL, NASL and our youth clubs all part of FIFA because we are all affiliated with USSF. So we must live with the rules of FIFA. Player development fees are paid all over the world and in the end the US youth clubs will get theirs as well. What youth clubs do are not do with the money that they get is no bodies business. I know what we are going to do with our money and that is to help more kids who don't have a pot to piss in and give them an opportunity to be a part of the system. My toilet paper has more credibility and substance then the MLSPU. The MLSPU should be spending their time fighting the MLS in getting more money for US players then fighting with a bunch of youth clubs. The MLS are paying mediocre foreign players millions of dollars while our US players are getting peanuts. If a European club wants a US player from a US youth club then they must pay developmental fees. Only through money will we finally get respect for our youth soccer in the US. This is about respect and we will get it. So everyone grow up. This is how global soccer works. No more lies. No more manipulation. Pay or you will get sued.

  5. john celeste replied, July 9, 2016 at 2:08 a.m.

    your comments are "on the money" Thanks

  6. Richard Brown, July 9, 2016 at 4:36 a.m.

    If multiple clubs helped train someone who was offered a mil to sign by a European club. Who gets compensated? One club or 5 others he played for?

    Some kid posted on a soccer site I am on.

    He makes 23 thousand after taxes helping with a club. He wants some of that money. If the above situation happened. He is also going to graduate school for another profession.

    Why do I think he probably would not help train players unless they paid him.

    Hey I had John Harkes for one game when he was 16. He did not like comming to Brooklyn from New Jersey. So we never saw him again. Maybe I should have got a couple of bucks.

    I fired a youth assist coach who help train one of our youth teams. Because he tried to get money from the parents of one of our less skilled players to train him on the side. Why, he was working on the team the kid was on. He is already the trainer the money hungry jerk was trying to bleed the parents of the kid got money.

  7. Richard Brown, July 9, 2016 at 4:42 a.m.

    I wonder what happen to Landon Donovan trainer I long forgot his name. He wanted to move from the west coast to the east coast. He was looking for job opportunities. He did not know most of the bigger clubs did not pay their coaches to coach. It was an honor to be asked to coach then.

    But we did pay our trainers. But not enough money for him to come here.

  8. Richard Brown, July 9, 2016 at 12:18 p.m.

    The idea of monetary compensation for youth clubs is not new. In fact it is old even here in the US. Who paid if a kid was on a youth club for over three years and wanted to move to another youth club in the general area. He needed a release signed by the old club. Also to get that release the new club had to pay a certain amount to money for each year he was with the old club. In other words we owned the player.

    That ended when parents got involved using lawyers to get their release. No one wants to deal with lawyers.

  9. aaron dutch, July 10, 2016 at 9:55 p.m.

    Solidarity payments could revolutionize access be urban, rural, poor american players. If we could get a real payment system then 100's of clubs from Europe could come over and set up 1000's of local academies which would build low cost training & development for millions of kids every 10 years. It would be a free quantum improvement to MLS

  10. R2 Dad, July 12, 2016 at 9:41 a.m.

    Thanks, Mike, very informative. Would like to read more about the anti-trust specifics.

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