Financial Fair Play

[ArdeeBhoy]

Very true. So what's new?

[Stuttgart88]

I bet you're great fun in the pub.

[ArdeeBhoy]

Well, was agreeing with you for one...

[BonnieShels]

Thanks. I was thinking you'd be interested in the German article posted in post 48 above. Basically it's saying that German football is reaping the rewards of long-term strategic thinking, focus on owership models and youth development instead of relying on oligarch funding and an instant gratification culture. This applies to Germany at large too, whereas Britian leaves everything to markets, lets its industry fall prey to big M&A deals, neglects skills and spends its whole time moaning about Europe and welfare spongers (I added that last bit myself).

Just rread it there. I think it sums up everything we assume about Germany. I remember heading there for the firswt time when I was 12 and just marvelling at the place. I then returned nine years ago for NYE and I was amazed that after the revellers had left Hannover's streets the cleaning crews began. They were just waiting...

That summed up Germany for me.

Geysir will no doubt blame the efficiency of the German street cleaning operations on the large corporate donations they receive. Front loaded with all this cash they can't wait to rid the streets of grime. No shame.

[Closed Account 2]

A player signing a contract can be told that his remuneration can contain a fixed amount, budgeted by his club in line with expected self-generated income. The effect of relegation is presumably less draconian on gate receipts than TV money. I'm told that in several cases, such as Southampton, season-ticket sales even rose after relegation as fans grasped the financial reality threatening their club.


I think it would be a better approach than the current system of FFP which is being attempted. It's all very hazy at the moment anyway, it seems that clubs can be punished if they have an unpaid debt (as in Malaga being banned from European football due to not playing players or taxes) yet other clubs with irregular debt structures (Man Utd and PIK loans, Barca with the loan they got to cover wages a few years ago) dont seem to be in trouble, and other clubs (like Madrid) have had their debts cancelled via agreements with a local council.

Some suggest that FFP will be linked to wages-to-turnover ratios, so a cash cow (like Man Utd) will be able to have a bigger wage bill than a rich man's play-toy club (like Anzhi) but again it's not at all clear how this can be inforced. For a start from a legal point of view it seems to be a restriction of trade - it could be difficult to prevent the rich man from spending as much of his money as he wants if he "gifts" it to his club. He could argue that there is no similar restrictions on other industries, for example look at airlines. If a billionaire decided to take over Lufthansa and then financially blew all other European airlines out of the water they could. If they decided to bulk buy numerous A380s and 787s configure them in an all-business class layout (so every seat would have infinite leg-room) and then sell every ticket for every destination for €1 (irrespective of when you booked it) then it would be very hard to stop him if he was spending his own money. Yes in terms of monoplies you could stop him taking over other airlines (e.g. buying KLM) and perhaps you could prevent him from subsidising his passengers air tax but it would be very difficult to stop him from throwing his own money away on a vanity project.

Even if FFP laws are passed and even if they are not sucessfully challenged in a court of law it's very hard to see how the likes of Chelsea / Man City / Anzhi etc won't fudge it. Man Utd are always crunching these "superlative" commerical deals (Chevrolet are to pay them something like £50mln a season), what's to stop Abramovic / Mansour / Kerimov setting up puppet companies simply to channel more of their money into the club? If Man Utd can get £50mln from Chevrolet, City or Chelsea could just set up a series of bogus deals of similar values with puppet companies and who can really leagally argue what fair value is. Could anyone argue if Etisalat paid City a similar amount?

Your idea of having performance related wages is more realistic in the long term. If you win the CL and domestic league you'll get prize money but also your players will get more in terms of bonus payments. If it's done correctly even the rich-owner clubs would probably agree to it, if they did it would be far less likely to be challenged legally. As you say it would be more even in the long run as a team won trophy after trophy year after year then their wage bill would be higher during this time.

[Stuttgart88]

Just a few points on Edmundo's post:

Malaga was punished mainly because of unpaid tax debts. That's a mortal sin for UEFA, whereas overspending is a couple of Hail Marys - for the moment.

I would see "contingent contracts" as sitting alongside rather than replacing FFP.

Wrt bogus sponsorship deals UEFA is aware of the issue and can insist - to the extent it can be proven - that commercial deals are at arm's length (Man City's Etihad Stadium naming rights - as one party said "what was the next highest bid?) and has vowed to be firm. I'm not sure what real impact this will have other than making sure teams don't take the p1ss.

Is it enforcable? The infamous Jean-Marc Bosman lawyer has just mounted a challenge based on 5 complaints, one of which is that the agent he is acting for will make less money! (http://www.independent.co.uk/sport/football/news-and-comment/uefas-financial-fair-play-rules-face-test-from-the-bosman-lawyer-8605315.html)

Is it a restraint of trade? The general rule of thumb as it relates to sport in interpreting EU legislature is that there is no carve-out or exception for sport that gives sport carte blanche to act indepentently of EU labour and competition law, as it used to do. That said, the EU (via the ECJ) does appreciate that sport is different and therefore if "rules" are introduced that on the face of it breach principles such as restraint of trade, movement of labour, abuse of monopoly power etc. but which can be shown to be important to help the sport adhere to recognised principles then these rules will be allowed by the ECJ as long as they are justifiable (e.g., to restore financial rationality and continue to foster fair competition), and proportionate (i.e,., they're not a sledgehammer to crack a nut). That's why, for example, collective TV rights sales are allowed. That would be classic cartel behaviour in non-sporting industries but it's allowed in football to retain competitive balance, and because cash intake is maximised and also passed on "down the pyramid" to grassroots.

I'm not sure you're right in saying that FFP will be enacted by way of wage-to-turnover ratios. Under FFP, such ratios act as a sort of "covenant" (if anyone's familiar with corporate loan clauses), the breach of which allow UEFA to step in and ask tough questions about strategy and impose remedies - basically an early-warning signal that the financial situation is deteriorating. I've often wondered why FFP didn't simply take the form of wage-to-turnover ratios and as far as I can tell it's because FFP deduct "useful" spending such as facilities upgrades, youth development and community outreach. FFP is generally less prescriptive than wage caps.

[geysir]

Just rread it there. I think it sums up everything we assume about Germany. I remember heading there for the firswt time when I was 12 and just marvelling at the place. I then returned nine years ago for NYE and I was amazed that after the revellers had left Hannover's streets the cleaning crews began. They were just waiting...

That summed up Germany for me.

Geysir will no doubt blame the efficiency of the German street cleaning operations on the large corporate donations they receive. Front loaded with all this cash they can't wait to rid the streets of grime. No shame.
A blind person can appreciate some of the aspects of German society. And like many municipalities around Europe, they do clean the streets in a timely fashion.
A German is efficient in the workplace as long as there's somebody to tell them what to do. A duty requiring initiative and imagination would leave many a German stumped. Perhaps that's why there are a host of decrees for the citizen to abide by. However, I did wonder where the happy Germans live.:)


You do remember, whilst most of you bailed out (with legs of jelly) and thought Dortmund had past their peak when limping past Malaga, a middling Spanish team, I thought they would still have the measure of Madrid.
There are some very admirable aspects in German football, amongst which, the traditional fan centric club structure and the change in emphasis on football education.
German football are belatedly doing what other countries have been doing with academies for years. Certainly, I had my doubts about the merits of the German model when I saw their u21 team (with Hummels, Badstuber, Schieber and Muller) get hammered 4-1 by Iceland's academy graduates in a do or die 2011 Euro qualifier. Nevertheless, those players (perhaps with the benefit of corporate cash in their back pocket) have emerged to the top standard.:rolleyes:


Bayern are a club apart because of their history and money. We'll see how the other clubs get on in European competition over the next few years.

[Stuttgart88]

Good article on the legal challenge to UEFA's FFP rules here

http://www.independent.ie/sport/soccer/fair-play-legal-challenge-sets-up-bosman-sequel-29278255.html

The last full paragraph is key: UEFA ought to be able to argue that the 'breach' of competition and free movement rules are justified - in fact I doubt that their justification will even be challenged - but UEFA must also prove that they are not overly restrictive, i.e., that they don't go too far. If the lawyer can get the ECJ to agree that there is a less restrictive way of ensuring financial stability then FFP could be in trouble.

My recollection however is that UEFA did not identify integrity of competition / competitive balance (or 'ensuring a level playing field' as the Indo writer, an Irish lawyer, argues in last paragraph) as an objective when it set out its vision for a new licensing landscape (and introducing FFP) a few years ago. This is where I think the Indo guy's article is incorrect. UEFA's reason for introducing FFP is to restore financial rationality to European football. Alongside a paper explaining their licensing /FFP 'vision' as a precursor to the actual rules they also published a pretty frightening report on football finances (linked below*).

Therefore I still see UEFA being on very solid ground. If you want clubs not to incur too much debt just make sure they more or less break even. I can hardly see it being argued that being made to break even goes too far in its goal to restore financial sanity to football.

UEFA was very clever not citing competitive balance as a reason to introduce FFP as that aspect probably could be challenged on 'proportionality' grounds.

* Here's the licensing benchmarking report UEFA published in 2008

http://www.uefa.com/MultimediaFiles/Download/Publications/uefaorg/Publications/01/45/30/45/1453045_DOWNLOAD.pdf

and here is the full licensing requirement, including financial fair play regulations

http://www.uefa.com/MultimediaFiles/Download/Tech/uefaorg/General/01/50/09/12/1500912_DOWNLOAD.pdf

On page 2 section 2 UEFA sets out the rationale for FFP. Only in Section 1 does it say that licensing is, among other reasons, to protect the integrity of UEFA competition. But it would appear to me that Section 1 deals with "pre-FFP" or "legacy" licensing requirements, such as grounds being adequate, various infrastructural and governance mechanisms being in place etc.

I don't think the broad licensing regime is under challenge, only the financial rules, so I stand by my opinion that competitive integrity / balance is not a stated objective of FFP, so the legal questions to be asked are:

(1) Are the objectives set out in page 2 section 2 legitimate concerns and is the FFP regime objectively justifiable? I'd say almost certainly based on the evidence of the licensing benchmark report.**

and

(2) Are the FFP measures proportionate in achieving these objectives? Although they may breach EU competition, trade and freedom of movement rules, do they only go as far as necessary to achieve the desired result? Is there no other less interventionist measure that would also achieve the objectives?

** For example, take this (badly written) extract from p64 of the 2008 benchmarking report:

"just under half of European top division clubs (47%) reported net losses in 2008. 37% of larger clubs and 55% of smaller clubs reported net losses. Nearly half of the clubs that reported losses, 22% of all clubs, reported losses that were significant, equivalent to more than 20% of income. Smaller clubs were more than twice as likely to report significant losses as larger clubs.”

[Stuttgart88]

Looks like Malaga and a few others have had their sanctions lifted:

http://www.uefa.com/uefa/mediaservices/mediareleases/newsid=1954532.html?rss=1954532+UEFA+Club+Financia l+Control+Body+adjudicatory+chamber+announces+deci sions

[BonnieShels]

That seems pretty clear cut.

Only noticed as well Ireland's insignificance in the new UEFA logo. Drat. Not that it's relevant.

NEW
http://upload.wikimedia.org/wikipedia/en/a/ab/UEFA_logo_2012.png

OLD
http://upload.wikimedia.org/wikipedia/en/b/b5/UEFA_logo.svg


I'm intrigued to know how this will evolve pending full implementation. We are entering into the unknown.

[peadar1987]

I'm more concerned about that disgraceful treatment of UEFA stalwarts Cyprus. Not to mention Kazakhstan.

[ArdeeBhoy]

Ha ha.

Whoever looks at that sh*tty badge anyway?

[Stuttgart88]

Tuesday 18th June, 6pm: debate on Financial Fair Play at Birkbeck College, London. It's just south of Euston in the Bloomsbury area of town.

Details here:

http://www.sportbusinesscentre.com/events/ffp2013/

[MariborKev]

Aye, had hoped to attend that FFP discussion but in Dublin for the day for the launch of Heart of the Game. Defo worth going along to if you are interested in the subject.

[Stuttgart88]

Interesting news in context of ownership and financial stress debated recently in the Bundesliga thread:

http://www.irishexaminer.com/sport/soccer/iniesta-saves-albacete-235488.html

The cash-strapped Segunda Division B outfit would have been demoted to the fourth tier of Spanish football on administrative grounds had they not settled the debt by noon on Friday.

However, Iniesta, the largest shareholder in the club at which he began his career, came to their aid, paying the outstanding wage bill out of his own pocket.

It is not the first time the 29-year-old has come to the rescue of Albacete as he injected €420,000 into the club in 2011.

[Stuttgart88]

Interesting article in the FT today by Stefan Szymanski, claiming that FFP will only lead to a de facto closed league system, something UEFA has always resisted, so it's kind of ironic.

http://www.ft.com/cms/s/0/a13db70c-05d7-11e3-8ed5-00144feab7de.html#axzz2cGO56uBK

Stefan is probably the world's foremost sports economist and I have met him through some mutual friends. He is a very free market / laissez faire thinker on football economics and has proposed a closed European super league in the past and has long denied that there is a systemic financial problem in football, so there is no need for FFP.

I took the liberty of responding via the comment section as I believe he has contradicted much of his best work in some of the claims he makes in the FT.

[Stuttgart88]

And this article from Fridays FT is one reason why I think even deeper regulation than FFP is required.

http://www.ft.com/cms/s/2/2745b0b6-0501-11e3-9ffd-00144feab7de.html#axzz2cGO56uBK

[Charlie Darwin]

Not sure I agree with your assessment of Syzmanski's perceived change of heart - the article seems like he's saying the system is superficially chaotic but there are stabilising features (administration, benefactors) that make it basically stable. Still, I think he's overegging the pudding by saying they're moving towards the US system - I think the league system is too developed and too entrenched to fall away even if a European Super League comes into being. And I also think the ossification of the current system is much of a muchness - realistically, the only teams that will lose out from this ossification are the fringe clubs in the top leagues. The elite is already set 90% in stone and it will probably move to 99% once the ESL gets up and running.

[Spudulika]

Have to agree with CD, the big clubs will find a way. A particularly well known club here in Moscow did a great deal last year on naming rights for their stadium. A so-so bank stepped in and agreed to pay quite a bit over the odds for the honour. Now, this would be seen as just mad business and mad sports business, however one of the main sponsors of the team has been another bank, owned by the company who are the biggest sponsor of the team, and this company just happens to be owned by the owner of the club. Now, odd thing is this, the bank who too up the naming rights, just happened to take a deposit from another bank (no names named) which just happened to be within 5% of the same amount they bought the naming rights for.

All legit, all good. Big clubs will always find a way, the FFP won't work.

[Charlie Darwin]

Sounds more or less like what the Abu Dhabi crew are doing in City and others elsewhere. Rules are made to be bent and I don't think any amount of rules will bring about the consensus that exists in US sport. There's too much money to be made in football and the traditions in football are strong enough that the clever moneymen will exploit the history of clubs to get ahead rather than it ever whittling down to a closed system, but what we have is a burgeoning entrechment of the top clubs that is just shy enough of being absolute as to keep it interesting.

[Stuttgart88]

Just on CDs first point about SS having a change of heart. SS has made a career writing that competitive balance and social mobility are over-exaggerated goals in football. This is because his opponents in academia have cited these as arguments in favour of regulation. Now he seems to be saying that they are a bit more important. So, if you have read his previous work I think there is a contradiction. He has since personally responded via the FT comment section anyway.

I think UEFA has some authority to face up to gaming the rules via naming rights etc but I agree that how they stand up to abuse of the rules will be key to how successful they are. PSG are clearly taking the p1ss, accounting for a naming rights deal struck in 2012 as 2011 income!

[ArdeeBhoy]

What about Monaco too?

Incidentally, maybe worth saying have to register with the FT site to view articles. And even then access is a bit restricted.

[Charlie Darwin]

I have to admit I have only read a chapter of Soccernomics so most of what I know about him is media reports and some of his other writing. Am I wrong about the slight modification of his position?

On the whole, I don't think FFP will achieve much. Maybe it's just the Shamrock Rovers fan in me, but a lot of this stuff seems fairly irrelevant to me. People will always throw money at elite football and the rest will be left behind. The horse has bolted and everything else is window dressing. It's not going to make me stop following my team because I didn't get into it for entertainment purposes, and I would hope that when all is said and done there will always be a core of people who will watch non-elite football for what it is rather than tuning into their TV sets for the major stars.

[Stuttgart88]

Sorry, AB, I'll copy the article later. I thought you can view a small number of articles for free.

I partially agree with Charlie, but I think FFP will work to some extent. Just like speed limits on motorways don't stop traffic accidents or speeding altogether, they do by and large introduce a safer system of driving. They'd be useless if speeding drivers weren't caught and punished, just like FFP will be toothless if nobody gets punished for breaking the rules.

I have read a fair bit of Szymanski's academic work because I studied under a rival scholar of his - Ardee Bhoy knows him I think. He is very much a free market economist resisting regulation or intervention. In sport the theoretical underpinning of the case for regulation (and as practiced in the US) is that the league loses its appeal and hence its commercial attractiveness if uncertainty of outcome is low. Stefan has written a lot arguing that there is no evidence in European football that lack of competitive balance has affected its popularity, and I think he has a fair point. But in the FT article my interpretation is that he is bemoaning the loss of competitive balance that FFP will introduce, although reading it again it's probably more about loss of social mobility than competitive balance. Again, though he has written about European super leagues as being the logical solution to the financial chaos.

[ArdeeBhoy]

No worries, but thanks. Did you mean SH?

Interesting stuff, but am very cynical about FFP. No account of the likely corruption or efforts already used to launder dirty money through numerous clubs, inc. the EPL, seems to have been factored in. So looks a lame duck already.

[Stuttgart88]

Yes, SH.

Here's the original article:



New financial rules herald Europe’s adoption of the US sports model, writes Stefan Szymanski

This will be the last year of European football as we know it. The “open” system by which the sport has long operated is now coming to an end, and will quickly become a “closed” American-style system.

This is all down to Financial Fair Play, the new regulatory system adopted by Uefa, European football’s governing body, which will bite next year. Instead of just tallying goals scored and conceded, fans will have to learn complicated rules about “break-even” and club licensing to work out who their opponents will be. Sporting merit will no longer be the sole criterion for success in competition.

This will be a big change for European football, a defining facet of which has long been the notion that anyone, anywhere, can set up a club and, through the pyramid system of promotion and relegation, aspire to play in the Champions League. Not that this is very likely, but there is still much mobility. Of the 104 teams that played in the top four English divisions between 2001 and 2010, only 26 stayed in the same division for the decade; the same number played at three different levels; and two teams managed to play in all four.

But this openness has also caused financial chaos. The last time anyone said that English football’s finances were healthy was the 1950s, when the players’ pay was capped at £20 a week and less than half of the population had a television. The same is true across Europe, where many clubs have fallen into cycles of extravagant spending, temporary success followed by financial disaster, retrenchment, frequent changes of ownership and the injection of new money.

Uefa tells us that in 2011, 63 per cent of clubs in Europe’s top divisions were reporting an operating loss and 55 per cent reported a net loss overall; 38 per cent reported negative net equity, and 16 per cent of club accounts contained a qualification expressed by the auditors as to the financial viability of the company. This is despite the fact that club revenues have grown at an annual rate of 5.6 per cent in the past five years.

So Uefa’s controls require clubs to break even, or face sanctions that could include exclusion from their lucrative competitions. But the regulations are complex and offer opportunities for litigation by disgruntled clubs. The rules will lack credibility if too many big clubs fail to meet the criteria early on. Will they all be barred? And what of the biggest names? Would any self-respecting fan want Barcelona or Real Madrid excluded?

Even so, this all brings Europe a little closer to the US, whose leading sports leagues have developed hugely successful championships based on a shifting bargain among franchise owners. Rules for sharing revenues and limiting player pay are designed to maintain a competitive balance between teams. Entry is strictly limited – buying into the National Football League or Major League Baseball will cost you upwards of $1bn today – and the rewards of this exclusivity are also huge. The leagues mostly give the fans what they want, and profit royally.

Europe is not there yet. Uefa has studiously denied that maintaining competitive balance between clubs is an object of FFP. Its plan, it says, is not to make sure that humble Crystal Palace has a chance to compete at the top of the English Premier League against Manchester United. And for good reason: the new rules are actually likely to ossify European competition and limit the potential for big clubs of today to be challenged.

Similar regulations are creeping in at national level. England’s Premier League now has a rule limiting wage bill rises to £4m a year for clubs already spending more than £52m. Of the league’s 20 clubs, 14 spend at or below this level, while the “big six” spend more than £100m – there are no plausible mechanisms for the smaller clubs ever to close this gap and compete.

But such ossification is a first step to a closed system – for which there are advantages. Well-matched teams are usually more attractive to watch than David and Goliath contests, however much we like fairy tales. There is more chance to see the biggest stars play each other in a closed system, and more potential for investment, whether in player training, stadiums or broadcasting.

But this is not football’s tradition. The open system of promotion and relegation has a romantic appeal, and makes for an intensity of competition US leagues sometimes lack. Moreover, financial chaos may have caused owners to lose money but almost never leads to the demise of clubs. As a system, the open model has been stable and attractive largely because of the gyrations of the individual clubs. It also limits the capacity of wealthy owners to leach large profits out of the game: no one is safe from competition.

It is ironic that Uefa, and many of those who lobby on behalf of fans, see the US system as anathema but seem to be doing everything possible to ensure its adoption. The Premier League welcomed another American owner last month, bringing the total to six, all of whom understand the two systems very well and are fully committed to the new regulation. They, at least, know where they are heading.

The writer is a professor at the University of Michigan and co-author of ‘Soccernomics’

[ArdeeBhoy]

Hmm, strange logic from yer man there. Think he's over-estimating the 'parity effect'.

[geysir]

According to Stefan
'This will be the last year of European football as we know it. The “open” system by which the sport has long operated is now coming to an end, and will quickly become a “closed” American-style system'

later on he takes a few steps back when he states

'Even so, this all brings Europe a little closer to the US'.

Then he states

'It is ironic that Uefa, and many of those who lobby on behalf of fans, see the US system as anathema but seem to be doing everything possible to ensure its adoption'

??
He does admit that ALL of what Uefa is doing is bringing Uefa a LITTLE closer the US system and yet he manages to get his knickers in a twist about that "little" as Uefa doing everything it can to adopt entirely the US system.

Also, since when is the argument about an open league system versus a closed league system, the core issue for european leagues and increasing inequality?
Yet he appears to be in favour of the Americanised closed system??
On his line about 'regulations are complex and offer opportunities for litigation by disgruntled clubs'.
Litigation by disgruntled clubs shouldn't be an threatening issue, all clubs sign on to arbitration.

Actually Stefan, doesn't present any argument at all, this is a very poorly presented article.

[Stuttgart88]

Yes, and his editor should get a slap on the wrist for letting it through with so many contradictions etc.

[Stuttgart88]

Decent article on the Dupont challenge to FFP here:

http://www.bbc.co.uk/sport/0/football/24333604

Putting aside whether we think FFP will ever work or not, I think from a pure legal argument perspective UEFA is still on a strong footing. Remember the restraint of trade represented by FFP could be allowed by the EU / ECJ if the objectives were both legitimately justifiable and a proportionate measure.

UEFA has cited financial rationality, up-to-date tax bills, community outreach and infrastructure investment as FFP's goals. These probably will be judged to be legitimate given what is actually happening in football.

But are they proportionate - do they only go as far as needed and no further? Is there no less "interventionist" measure?

Dupont is challenging the proportionality aspect. He claims that a luxury tax would be a less restrictive measure.

If I was UEFA I'd argue that a luxury tax might put some dent on sugar daddy funding and pass on some money further down the game, but it would still fail to address the systemic consequences - the industry-wide arms race for talent which damages the middle tier particularly badly.

I still think UEFA is on solid ground and they wisely consulted the EU when drawing up FFP. They were also wise not to include competitive balance as an objective - the legitimacy of this could be challenged by Dupont.

[Stuttgart88]

PSG 5 up tonight and with no chance of complying with FFP. What chance of PSG going out due to a highly controversial ref decision later on?

[ArdeeBhoy]

There must be a few others surely, or they're the most obvious?

[Stuttgart88]

Most of the others will scrape in I think. PSG have no chance I think.

[ArdeeBhoy]

Really? On both counts.

[geysir]

Why do you think PSG have no chance, Stutts?
Surely it should touch the hearts of Uefa that PSG were able to find such a generous sponsor at the 12th hour, who has offered unlimited cash every year, until infinity?

[Closed Account 2]

If you look at a lot of Platini's statements about his FFP project, there have always been get-outs. He's consistently said stuff like "banning clubs is a last resort", that if clubs are "seen to be heading in the right direction" they might avoid bans. Which is probably very handy if your son is on the board of the company that sponsor PSG.

I'm not sure FFP will stand up in any court of law. The accounting and taxation regiemes are very different across Europe and if you dont have every club on a level playing field then FFP could be open to a challenge. For instance say Spanish and English clubs are subject to 50% tax but Russian and Ukrainian ones are subject to 13% then the former are already at a disadvantage - a better example is Platini's own league. Monaco are tax exempt, but other French clubs (like PSG or Marseilles) are subject to a tax rate of around 75% - how can PSG, Marseilles, Lyons etc be held to the same standard as Monaco given such a disparity. For example if PSG and Monaco both want to sign a promising player on a salary of €150,000 per week, Monaco's total annual expense on that player will be approx €7.8m, PSG's will be €13.7m. Pad that out over a squad of 25 and and you're looking at €145m a year. I appreciate that not every player in a 25 man squad will earn €150k per week, but say 11 do then you are still looking at €64m. Once you establish that clubs are working in different environments (due to different taxation and acccounting situations) then the legal side of it falls down. One option would be to try and look at figures before taxation (so essentially tax is deductable from any FFP calcuations) but that doesnt solve the disparity all it does is conveniently shunt it outside of FFP's remit.

[Charlie Darwin]

What has tax got to do with anything? FFP isn't about fairness and UEFA have been very careful to ensure it has not been presented that way, for the very good reason that it would then likely be seen as incompatible with competition law. It's about linking clubs spending with their current income, nothing more, nothing less.

[geysir]

AFAIU from the UEFA document (http://www.uefa.com/MultimediaFiles/Download/Tech/uefaorg/General/01/80/54/10/1805410_DOWNLOAD.pdf) , a club is mandated to pay all employer related social taxes etc. And in the tax expenses in the accounts, that does not include VAT or tax and social security contributions in respect of employees.
There's no reference to differing tax systems.
But the language used in that document is just plain hostile in places. No wonder, legal accountants don't write bestsellers.
The question UEFA will have to deal with is PSG and the blatant sponsorship stroke they pulled off in order to provide income for their expenditures. There doesn't appear to be any criteria by which Uefa measure the value of the friendly sponsorship other than what they claim is "fair" - Is the value of the sponsorship, a fair value? Then there are a number of sanction options, from mild to wild, that Uefa can choose from if they decide it's not fair. You'd wonder if the flakey 'fair' clause Uefa have inserted to deal with this situation have been left deliberately vague, so vague that PSG can drive a JCB right through them.
I think PSG will escape with a warning or maybe a fine at worst.

[Stuttgart88]

In PSG's case they have actually recorded the sponsorship deal in the financial accounts of the year preceding the one it was struck in!

I've written before here that I do think FFP will stand up to a legal challenge.

Just for info, it's a mistaken belief that there is a 'heading in the right direction' get out.

Ed Thompson's blog below contains a bit of stuff on Monaco and a lot on PSG and the possible sanctions, and timing of the sanctions. You have to scroll down to find the articles.

http://www.financialfairplay.co.uk

[Closed Account 2]

Just for info, it's a mistaken belief that there is a 'heading in the right direction' get out.


I guess someone should tell Platini. This is a quote from him 1-2 months ago:
"Do not think we are going to take five to 10 clubs out of the European competition. Definitely that would be the very, very last straw. If we have repeat offenders okay, yes, they will have to be punished severely — possibly."
http://www.standard.co.uk/sport/football/michel-platini-exclusive-were-not-out-to-kill-clubs-but-to-help-them-grow-8795782.html

A take on it in the Manchester Guardian seems to suggest something similar.
"But there are crucial caveats. If clubs can show that they are travelling in the right direction, that their losses are reducing year on year and can point to them being a result of contracts signed before June 2010 when the rules were enshrined in Uefa's rulebook, that may reduce the sanction. An outright European ban is being described as a last resort – but an eminently plausible one."
http://www.theguardian.com/football/blog/2011/jan/11/uefa-financial-fair-play-rules


I'm still not convinced, the concept of FFP is legally water-tight. It seems, perhaps by accident rather than design, to propigate the cabal or oligopoly of elite clubs and this would put it at odds with most EU (and a lot of domestic) anti-competition law. I can't think of many other sectors where you can legally restrict external investment in companies (private or publically listed) in the way FFP will. There is talk of football trying to get some form of "special status" where standard EU laws are relaxed, but is this possible? And how would it apply to non-EU countries? Even if the concept of FFP is given a legal all-clear, I would be surprised if some of the big threatend clubs arent able to circumvent it. Man Utd have reportedly agreed a £60m/season with Nike for shirt sponsorship, they are also supposedly getting £45m/season from Chevrolet. In normal conditions you wouldnt expect clubs like Man City, PSG or Chelsea to be able to acheive these numbers, Nike and Adidas are unlikely to match that figure for them. But they could go down the MiFit route and create a proxy company to make their own kit, doing this if they declare £100m per season sponsorship deals can they be challenged given a precident (of that figure) has been set?

[Stuttgart88]

Edmundo, I haven't got time today but I've written at length on foot.ie about the so-called specificity of sport as it relates to EU law. I reckon I've already written about it at length in this thread but if not I have definitely written about it in a recent thread I started in 'Other Sports', a thread beginning with 'For Sports Law buffs...".

Basically sport is not exempt from EU labour law or EU competition law. However, it is recognised that sport differs from normal industries in certain respects and therefore if a sports body imposes a rule that in ordinary circumstances would be in breach of EU law but this rule can be objectively justified on sporting grounds and shown to be a proportionate measure, then the rule is likely to be tolerated.

UEFA has stated that its objective is to restore financial rationality to European football, to encourage infrastructure development and community roots. Furthermore, clubs must be up to date with tax liabilities. These are legitimate objectives in most people's eyes and FFP is probably a proportionate response. It could go even further in my opinion.

UEFA did not cite competitive balance as an objective because there probably are several less 'intrusive' methods of achieving this, so it would fall foul of EU law on proportionality grounds.

Oh, that Guardian article quoting the direction of travel: was that Platini or the journalist?

You need to go to article XI of the UEFA licensing manual (which contains FFP) to see that direction of travel is not a carve out.

As for crystallising the cabal of leading clubs, I'd say yes, it probably does. But I think it's better that these big clubs are kept on a self sustaining financial path to both eliminate the 'arms race' between them and also to place less pressure on clubs below to spend money they can't afford merely to try and keep up.

It's funny, but one of FFP's biggest critics, the author and academic Stefan Szymanski, is arguing exactly that it'll keep the rich clubs in their place in the pecking order. But equally, before FFP he used to argue that it doesn't matter if big clubs are big, dynasties have always been the case in European football. Fans get their context from other ways than seeing their team win titles.

[Stuttgart88]

Edmundo, this is a bit technical but tells you all you need to know about sport and EU law.

http://www.pravst.hr/dokumenti/zbornik/2012106/zb201204_697.pdf

It doesn't matter about non EU countries. If an Israeli club wants to enter a UEFA competition it must comply with the competition rules, set by UEFA.

I agree that sponsorship from a related party is a thorny issue. I am told UEFA will stand firm on this but we'll see.

I think the key thing is that the European Club Association, a lobby group of close to 200 clubs, are in favour of FFP. Big clubs and small clubs are in favour, by and large.

I think under FFP we'll see more Swanseas and fewer Portsmouths.

[Stuttgart88]

I know this is a rather dry topic but Daniel Geey, a London lawyer specialising in football, has written the following which I think is worth reading:

http://www2.warwick.ac.uk/fac/soc/law/elj/eslj/issues/volume9/geey/#a6

He specifically explains why FFP are unlikely to be inconsistent with EU competition law. He also says it is unlikely that any club will take action on basis of EU law because at every step in the formulation of these rules, the ECA was consulted.

He also clarifies the perceived 'direction of travel' carve out. The improving direction of travel is only taken into consideration if the reason for the club being in breach of the break even rule is due to wages negotiated in contracts signed before FFP was announced.

So, less of your silly stuff about football trying to exempt itself from EU law. That's just nonsense :)

[geysir]

In PSG's case they have actually recorded the sponsorship deal in the financial accounts of the year preceding the one it was struck in!

I've written before here that I do think FFP will stand up to a legal challenge.

Just for info, it's a mistaken belief that there is a 'heading in the right direction' get out.

Ed Thompson's blog below contains a bit of stuff on Monaco and a lot on PSG and the possible sanctions, and timing of the sanctions. You have to scroll down to find the articles.

http://www.financialfairplay.co.uk
The validity of that stroke by PSG has yet to be assessed by UEFA, isn't it so?

You'd wonder who is behind the legal challenge to FPP, can it really be financed by an agent?

A football club like PSG does not have to comply with the rules of the national assoc or Uefa, does it? They can choose not to participate in the competitions. But if they do choose to participate, then they have to sign up and follow the rules. It would be quite ridiculous for a club to be allowed function as a bona fide corporation in the world of football, eg, PSG take over Marseilles, then buy out Fulham fc. Decide that Marseilles is no longer feasible, sell the players and ground. I can see where the rights of players are protected by EU law, but for the life of me I can't see how a club can be allowed decide for itself that it wants to function like a freelance corporation in a football environment.

[Stuttgart88]

Yes, I think there's a unit within UEFA called the club financial control panel whose task it is to assess whether clubs comply with FFP.

It's apparently independent of UEFA bigwigs so is supposed to be objective. The first compliance assessment is next spring and compliance with break-even and any dodgy means of achieving break-even will be judged upon then by this panel. Ironically it is made up of European businessmen with a track record of spectacular insolvencies!

Daniel Geey has written about this and how potentially awkward it'll be for UEFA to have to sanction a club that is already in the CL semi final.

Edit: here it is http://www.danielgeey.com/uefa-financial-fair-play-and-sanctions-an-unsatisfactory-situation/


I'm not sure I understand Geysir's last paragraph fully. UEFA had already got rules in place about clubs owned by the same party not being allowed to compete in UEFA competition. Spurs' largest shareholder Joe Lewis, via an investment company ENIC, had stakes in a few clubs ( including Rangers?) and was told only one club could compete in any one competition, to protect the integrity of the competition. Spurs drew Slavia Prague, both ENIC controlled, and UEFA kicked up a fuss via CAS.

National associations' rules on multiple club ownership differ. England is quite tight, which is interesting given any crook or charlatan can own a club there(!) but Spain is very lax.

Placing a restriction on a club's takeover activity might be a breach of competition law but mergers are blocked in all industries by antitrust regulators all the time and in football's (and other sports') case you could easily argue that protecting integrity of sporting competition is a reasonable reason to restrict multiple club ownership. A google search just now revealed a David Conn article saying UEFA had to comply with the EU definition of majority control (50.1%) even though UEFA wanted the bar set lower to determine effective control.

There was talk recently of EPL clubs buying lower division clubs as feeder clubs but Im not sure where that led to. Obviously clubs like City are said to want to buy a MLS franchise.

Our friend Daniel Geey is yet again the best source of info on where this issue stands from a legal perspective

http://www.danielgeey.com/multiple-football-club-ownership-disparities-between-rules/

To some extent FFP places restrictions on clubs' corporate activity. In calculating income, only football related income is allowed to be counted. Given that clubs like Arsenal also make material income from redeveloping property on the site of the Emirates this is a bit of a grey area but I think the proximity of the properties to the stadium allowed it to be interpreted as football related. Also, clubs using their grounds for concerts etc. is allowed to be counted as football income.

[geysir]

I thought the point was clear, if a club wants to compete in a league, it has to sign up to follow the rules. If the rules say one club can't buy another, then a club can't go running to a court claiming restrictive business practices are being imposed upon them where there's no danger of a monopoly.
Same would go for a club trying to bypass FFP by pouring money in via a friendly sponsor, and then go running to the court to challenge the restriction on their right to do that after running foul of FFP rules. The disputes about interpretation of FFP should be left to CAS.
UEFA should be able to set the entry requirements for clubs to compete in their CL.

From my layman's interpretation of FFP, the word "fair value" is a wooly, airy fairy, concept in relationship to sponsorship value. Can it have been that difficult to come with some other method, such as sponsorship deals need a pre approval from the association, deal with it before the club goes on a transfer/ player contract splurge.

[Stuttgart88]

I think it's pretty clear that UEFA will benchmark commercial deals against comparable transactions that genuinely struck at arms length. If a commercial deal from a related party dwarfs the most obvious benchmark then it's a flagrant breach of the rules. If the value of the deal is close to the benchmark then UEFA wil leave it stand. Theres probably a bit of leeway for clubs to game the rule.

As I understand it he "sponsor" can pay as much as it wants but UEFA will only allow so much of it to count as income.

[geysir]

It will all come to light soon what Uefa understands by 'fair value' and what 'fair value' standard they can impose on the clubs according to Uefa FFP rules.
If Uefa do what you understand then PSG will face the heaviest of sanctions, if Uefa act as I think they will act, then PSG will get a warning of sorts.

[Stuttgart88]

A good point made by yer man Daniel Geey is that if UEFA are seen as being soft on an offender then they are open to litigation by an affected club. So, for example, if 4th placed team qualifies for the UCL but with dodgy accounting at the expense of 5th placed team who had complied fully with all the rules, 5th placed team can take legal action either for damage or to be awarded with qualification.

As you say though, I wouldn't expect a drastic sanction by UEFA on PSG. I suspect that PSG will start to tow the line quite soon, much like Chelsea are doing now. They went on a once off binge to get to the top table and that's where they'll remain. Although the French taxation issue is an interesting one...

[Stuttgart88]

Interesting article on the Striani / Dupont challenge to FFP in the European Courts.

http://www.irishexaminer.com/sport/soccer/two-decades-later-another-bosman-case-simmers-250794.html

Dupont, the lawyer who represented Bosman in the 90s, believes that UEFA's model of territoriality undermines smaller countries (probably fair) but also throws in the usual bomb of a joint Scots / Irish league. He doesn't go as far as endorsing it, simply saying it's feasible it would - even if only to a small degree - improve quality in both leagues. Not overly fanciful.

“Under Uefa rules, each national football association must organise its competitions within its boundaries. By maintaining those rules, Uefa denies top club football to places like Dublin, Brussels [and] Vienna. Consequently, Uefa cannot use the “integrity argument” regarding FFP since it has itself produced a structural playing field that’s uneven to begin with.”

Dupont says: “If tomorrow, Scotland and Ireland would decide to have a common Premier League, would it improve (even slightly) the level of football in both territories? I think it would. This example is just to show that even small changes would make a difference.”

Dupont also feels that a city like Dublin could stir things up by challenging the inability of a club to have access to a bigger market by virtue of UEFA's territorial system.

Striani is not challenging Uefa’s existing territorial pattern as part of his case but Dupont feels a club would stand a reasonable chance in the EU courts if they decided to pursue a legal route. “If a Dublin club agrees with the English Premier League to play with them, from the perspective of EU law, it is their absolute right to do so. Therefore, any entity (FAI, Uefa, etc) that would try to stop it from happening would face an uphill battle. They would bear the burden of proof and would need to justify why such a violation of EU law would be absolutely necessary. I have my doubts that they would succeed.”



Interestingly, UEFA stated its objection to a joint Russian-Ukrainian league very recently.