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Financial Fair Play
- Thread starter NewmarketYid
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Very interesting article on Financial Fair Play
From the Wall Street Journal. Have to say that I agree with it:
http://online.wsj.com/article/SB1000...271428024.html
Football's Anticompetitive Streak
Some of Europe's biggest clubs are, unsurprisingly, supporting rules that entrench their dominance.
By JEAN-LOUIS DUPONT
Normally, if a trade association introduced rules that raised barriers to entry and entrenched dominant players, antitrust regulators would be up in arms. Yet UEFA—the Union of European Football Associations—seems to enjoy the support, even the encouragement, of the European Commission on new rules that will do just that.
The Financial Fair Play (FFP) rules, which come into force in the 2013-14 season, prevent football clubs from spending more than what they earn each year. Clubs that do not comply with this "break-even" principle will face sanctions, including a potential ban on participation in UEFA competitions.
The new rules, which were first proposed in 2009, are supposedly meant to stop clubs' ballooning financial losses, which according to UEFA have threatened both individual, highly popular clubs and the future of European football as a whole.
All of this sounds reasonable at first. But as an agreement whereby industry participants jointly decide to limit investments, FFP likely constitutes collusion and hence a violation of EU competition law. FFP may also infringe other EU freedoms such as the free movement of workers and services.
This isn't the view of the European Commission. In a letter dated March 12, 2012, competition chief Joaquin Almunia wrote to UEFA President Michel Platini to say that he welcomed the break-even rule, stating that "this principle is also consistent with the aims and objectives of EU policy in the field of State Aid."
But the European Court of Justice might see it differently. This wouldn't be the first case in which sporting rules are struck down by the EU's highest court. In the 1995 Bosman ruling, the ECJ ruled against restrictions that prevented football players from moving to new clubs after their contracts expired. The Luxembourg-based court also prohibited domestic football leagues and UEFA from placing quotas on the number of non-EU players allowed on teams.
In its Meca-Medina judgment of 2006, the ECJ set an even more important precedent: that sports do not constitute a special case before EU law. The court must apply the same tests to sports as it does to any area of economic activity. I was involved in both of these cases, and I would note that in each instance the governing bodies concerned had initially received the full support of the European Commission.
The relevant test for sporting rules, therefore, is that if they distort competition or other EU freedoms, they must do so no more than is necessary in pursuit of legitimate objectives. That FFP distorts competition and EU freedoms is plain: EU case law has held that football players are the raw materials for football clubs to produce their final product. FFP is a joint agreement between clubs to limit their freedom to hire players by restraining their ability to spend on wages and transfers. This restraint of free competition may at the same time constitute a violation of the free movement of workers.
The next question is whether the objectives of FFP are legitimate and necessary. UEFA has put forth several objectives for FFP, the first of which is preserving the long-term financial stability of European football. This is laudable but unlikely to be considered such a fundamental objective that it justifies restricting competition.
A second objective, to preserve the integrity of the game in UEFA competition, might be looked upon better. But in fact, FFP is more likely to hinder than help in this regard.
European club football is characterized by numerous competitive imbalances: between clubs competing in UEFA competitions, between the domestic leagues of different countries, and between individual clubs in those leagues. Often the key determinant of a club's financial strength is the size of its domestic market and the commercial realities that apply within it—competing in the English Premier League will always be more lucrative than in its Scottish counterpart. As a result, the leading clubs of smaller countries such as Luxembourg or Ireland will always be at a disadvantage next to the leading clubs of bigger markets.
The break-even rule makes no allowance for the commercial disparities between individual national leagues, which means smaller clubs are hit harder, proportionately, than larger ones. Without the ability to invest in their longer-term success, smaller clubs will stay small. This is clearly anticompetitive.
Even if FFP were sufficiently legitimate and necessary to justify its distortions of EU principles, however, it would still have to clear a final hurdle: proportionality. UEFA would need to convince the EU's judges in Luxembourg that FFP is the least restrictive means of achieving its aims.
This seems unlikely. Existing UEFA regulations already require clubs to prove before the start of each season that they have no overdue payables to other clubs, to their employees or to tax authorities. With these safeguards already in place, it is hard to see why we need to stop clubs from incurring losses if and when they can safely fund them from the resources at their disposal.
If the ECJ were to declare FFP invalid, the ruling would hold for any FFP-based rules adopted at the national level. EU law also applies to restrictive practices that affect the territory of any single member state.
None of this implies, however, that competition law prevents UEFA from improving football's financial model. If UEFA is serious about tackling the issue, it should address the root causes of the competitive imbalances among teams. UEFA's territorial model could be redrawn, for instance, to allow clubs from major cities but small countries to become more competitive. More ambitious revenue-sharing between clubs and/or whole leagues, partly financed by a "luxury tax" on high-spending clubs, would also help.
But such solutions would run against the interests of the clubs with the most political clout. Some of Europe's biggest clubs are, unsurprisingly, the loudest supporters of rules that entrench their dominance. The time is right for a strong reminder from the EU's antitrust authorities that football, like any other multibillion-euro industry, must comply with the law.
Mr. Dupont is a European competition lawyer specializing in professional sports.
From the Wall Street Journal. Have to say that I agree with it:
http://online.wsj.com/article/SB1000...271428024.html
Football's Anticompetitive Streak
Some of Europe's biggest clubs are, unsurprisingly, supporting rules that entrench their dominance.
By JEAN-LOUIS DUPONT
Normally, if a trade association introduced rules that raised barriers to entry and entrenched dominant players, antitrust regulators would be up in arms. Yet UEFA—the Union of European Football Associations—seems to enjoy the support, even the encouragement, of the European Commission on new rules that will do just that.
The Financial Fair Play (FFP) rules, which come into force in the 2013-14 season, prevent football clubs from spending more than what they earn each year. Clubs that do not comply with this "break-even" principle will face sanctions, including a potential ban on participation in UEFA competitions.
The new rules, which were first proposed in 2009, are supposedly meant to stop clubs' ballooning financial losses, which according to UEFA have threatened both individual, highly popular clubs and the future of European football as a whole.
All of this sounds reasonable at first. But as an agreement whereby industry participants jointly decide to limit investments, FFP likely constitutes collusion and hence a violation of EU competition law. FFP may also infringe other EU freedoms such as the free movement of workers and services.
This isn't the view of the European Commission. In a letter dated March 12, 2012, competition chief Joaquin Almunia wrote to UEFA President Michel Platini to say that he welcomed the break-even rule, stating that "this principle is also consistent with the aims and objectives of EU policy in the field of State Aid."
But the European Court of Justice might see it differently. This wouldn't be the first case in which sporting rules are struck down by the EU's highest court. In the 1995 Bosman ruling, the ECJ ruled against restrictions that prevented football players from moving to new clubs after their contracts expired. The Luxembourg-based court also prohibited domestic football leagues and UEFA from placing quotas on the number of non-EU players allowed on teams.
In its Meca-Medina judgment of 2006, the ECJ set an even more important precedent: that sports do not constitute a special case before EU law. The court must apply the same tests to sports as it does to any area of economic activity. I was involved in both of these cases, and I would note that in each instance the governing bodies concerned had initially received the full support of the European Commission.
The relevant test for sporting rules, therefore, is that if they distort competition or other EU freedoms, they must do so no more than is necessary in pursuit of legitimate objectives. That FFP distorts competition and EU freedoms is plain: EU case law has held that football players are the raw materials for football clubs to produce their final product. FFP is a joint agreement between clubs to limit their freedom to hire players by restraining their ability to spend on wages and transfers. This restraint of free competition may at the same time constitute a violation of the free movement of workers.
The next question is whether the objectives of FFP are legitimate and necessary. UEFA has put forth several objectives for FFP, the first of which is preserving the long-term financial stability of European football. This is laudable but unlikely to be considered such a fundamental objective that it justifies restricting competition.
A second objective, to preserve the integrity of the game in UEFA competition, might be looked upon better. But in fact, FFP is more likely to hinder than help in this regard.
European club football is characterized by numerous competitive imbalances: between clubs competing in UEFA competitions, between the domestic leagues of different countries, and between individual clubs in those leagues. Often the key determinant of a club's financial strength is the size of its domestic market and the commercial realities that apply within it—competing in the English Premier League will always be more lucrative than in its Scottish counterpart. As a result, the leading clubs of smaller countries such as Luxembourg or Ireland will always be at a disadvantage next to the leading clubs of bigger markets.
The break-even rule makes no allowance for the commercial disparities between individual national leagues, which means smaller clubs are hit harder, proportionately, than larger ones. Without the ability to invest in their longer-term success, smaller clubs will stay small. This is clearly anticompetitive.
Even if FFP were sufficiently legitimate and necessary to justify its distortions of EU principles, however, it would still have to clear a final hurdle: proportionality. UEFA would need to convince the EU's judges in Luxembourg that FFP is the least restrictive means of achieving its aims.
This seems unlikely. Existing UEFA regulations already require clubs to prove before the start of each season that they have no overdue payables to other clubs, to their employees or to tax authorities. With these safeguards already in place, it is hard to see why we need to stop clubs from incurring losses if and when they can safely fund them from the resources at their disposal.
If the ECJ were to declare FFP invalid, the ruling would hold for any FFP-based rules adopted at the national level. EU law also applies to restrictive practices that affect the territory of any single member state.
None of this implies, however, that competition law prevents UEFA from improving football's financial model. If UEFA is serious about tackling the issue, it should address the root causes of the competitive imbalances among teams. UEFA's territorial model could be redrawn, for instance, to allow clubs from major cities but small countries to become more competitive. More ambitious revenue-sharing between clubs and/or whole leagues, partly financed by a "luxury tax" on high-spending clubs, would also help.
But such solutions would run against the interests of the clubs with the most political clout. Some of Europe's biggest clubs are, unsurprisingly, the loudest supporters of rules that entrench their dominance. The time is right for a strong reminder from the EU's antitrust authorities that football, like any other multibillion-euro industry, must comply with the law.
Mr. Dupont is a European competition lawyer specializing in professional sports.
Superhudd
Simon Davies
Re: Very interesting article on Financial Fair Play
Yet, with a 36,000 sized stadium we may have been able to break the top 4 mould of Champions League teams. By hard work, astute signings and a brilliant financial brain. Which so happens to be the right way to do things in football.
Last time I looked spending money on the infra-structure didn't accrue against FFP. So, if a teams has the fans it can break the top 4 Champions League monopoly.
Yet, with a 36,000 sized stadium we may have been able to break the top 4 mould of Champions League teams. By hard work, astute signings and a brilliant financial brain. Which so happens to be the right way to do things in football.
Last time I looked spending money on the infra-structure didn't accrue against FFP. So, if a teams has the fans it can break the top 4 Champions League monopoly.
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BrainOfLevy
Michael Carrick
Re: Very interesting article on Financial Fair Play
I like his suggestions, but I don't agree with him totally that FFP is wrong. Doesn't it still allow clubs to invest in infrastructure? Therefore you should still be able to rise up and be competitive, just doing it in the sustainable way. There's no fun in letting clubs cut the route to success by getting it instantly, and it promotes the way of thinking that leads to clubs spending beyond their means and struggling.
I like his suggestions, but I don't agree with him totally that FFP is wrong. Doesn't it still allow clubs to invest in infrastructure? Therefore you should still be able to rise up and be competitive, just doing it in the sustainable way. There's no fun in letting clubs cut the route to success by getting it instantly, and it promotes the way of thinking that leads to clubs spending beyond their means and struggling.
Re: Very interesting article on Financial Fair Play
I can't agree that it's anti-competitive. If anything, it helps the clubs that are doing things the right "right way". Clubs need to stop throwing money around in the hope that they will eventually get it right, start making long term plans and actually stick to them.
Changing manager every other season and letting the new guy spunk a load of money you don't really have isn't the way to sustained success. Invest in youth, give players a chance to develop. Instead of bringing in overpaid mercenaries whose only lasting effect is crippling a club financially, how about the manager gets out on the training pitch and works with the players he's got? That's certainly more beneficial to a team than sitting in your office, chatting with your agent buddies about how big your take will be.
I can't agree that it's anti-competitive. If anything, it helps the clubs that are doing things the right "right way". Clubs need to stop throwing money around in the hope that they will eventually get it right, start making long term plans and actually stick to them.
Changing manager every other season and letting the new guy spunk a load of money you don't really have isn't the way to sustained success. Invest in youth, give players a chance to develop. Instead of bringing in overpaid mercenaries whose only lasting effect is crippling a club financially, how about the manager gets out on the training pitch and works with the players he's got? That's certainly more beneficial to a team than sitting in your office, chatting with your agent buddies about how big your take will be.
Re: Very interesting article on Financial Fair Play
Of course FFP is anticompetitive.
In no other business sector would an owner be penalised for investing in his / her business.
Investing in a business is essential in order for it to grow. Denying a business such investment - or, at least, penalising it for benefiting from such investment - is guaranteed to do only one thing: maintain the status quo, with the companies that already lead the market having a perpetual advantage over all the others. That is the very definition of anticompetitive.
Sorry, but there's no getting away from that truth.
Of course FFP is anticompetitive.
In no other business sector would an owner be penalised for investing in his / her business.
Investing in a business is essential in order for it to grow. Denying a business such investment - or, at least, penalising it for benefiting from such investment - is guaranteed to do only one thing: maintain the status quo, with the companies that already lead the market having a perpetual advantage over all the others. That is the very definition of anticompetitive.
Sorry, but there's no getting away from that truth.
Spursalot
Jimmy McCormick
Re: Very interesting article on Financial Fair Play
Football clubs are a poor example of a business though. In any other business you would try to eliminate your competition by stealing their customers.
You can't eliminate football clubs via business, as fans attatch themselves to the club, rather than the product. Each football club needs the others around it to be successful. It's a mutually beneficial sector. If all the businesses are stronger then there will be far more interest. It's one of the reasons La Liga isn't a the globally dominant brand.
Football clubs are a poor example of a business though. In any other business you would try to eliminate your competition by stealing their customers.
You can't eliminate football clubs via business, as fans attatch themselves to the club, rather than the product. Each football club needs the others around it to be successful. It's a mutually beneficial sector. If all the businesses are stronger then there will be far more interest. It's one of the reasons La Liga isn't a the globally dominant brand.
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Re: Very interesting article on Financial Fair Play
Absolutely.
But that doesn't change the fact that FFP is, in essence, anticompetitive.
Absolutely.
But that doesn't change the fact that FFP is, in essence, anticompetitive.
Re: Very interesting article on Financial Fair Play
Football isn't business, it's a sporting competiton. All sports and competitions have rules.
I have no problem finishing a computer game in GHod mode, but it makes it much less of an achievement and it ruins the competitive element if we were a group playing against each other. To draw the analogy further, it's like going on ebay and buying all kinds of skills and weapons so I can skip all the hacking and slashing and just go kill the final boss. The real glory is in the journey.
Football isn't business, it's a sporting competiton. All sports and competitions have rules.
I have no problem finishing a computer game in GHod mode, but it makes it much less of an achievement and it ruins the competitive element if we were a group playing against each other. To draw the analogy further, it's like going on ebay and buying all kinds of skills and weapons so I can skip all the hacking and slashing and just go kill the final boss. The real glory is in the journey.
Re: Very interesting article on Financial Fair Play
Fine sentiments.
But they will cut no ice with the European Court of Justice.
Preventing or penalising investment in a business will, if FFP is challenged, have to be deemed as anticompetitive.
Fine sentiments.
But they will cut no ice with the European Court of Justice.
Preventing or penalising investment in a business will, if FFP is challenged, have to be deemed as anticompetitive.
Spursalot
Jimmy McCormick
Re: Very interesting article on Financial Fair Play
I don't think it would.
The overall business is 'The Premier League', the overriding body of which would have absolute authority to place it's own rules upon it's competitors.
If it wants to limit it's competitors then it has every right to do so.
After all, the clubs have every right to leave if they think they are being treated unfairly.
I don't think it would.
The overall business is 'The Premier League', the overriding body of which would have absolute authority to place it's own rules upon it's competitors.
If it wants to limit it's competitors then it has every right to do so.
After all, the clubs have every right to leave if they think they are being treated unfairly.
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Re: Very interesting article on Financial Fair Play
It can set its own rules with regard to all sorts of matters that apply to football specifically and sport generally.
But I very much doubt that it will be able to get away with setting its own economic rules.
It can set its own rules with regard to all sorts of matters that apply to football specifically and sport generally.
But I very much doubt that it will be able to get away with setting its own economic rules.
Spursalot
Jimmy McCormick
Re: Very interesting article on Financial Fair Play
In the case of Europa/Champions League you only get to compete if you get invited. If their rules state that you won't get in if you don't stick to FFP then what has that got to do with the Court of Justice?
They're not saying you are forbidden to invest in the team, in fact you are perfectly within your rights to pump millions upon millions into them if you want. However if you want an invitation to the European competitions then you will have to play by their rules.
I see no issue with that whatsoever.
The court would have no business deciding who they should or should not invite into their competitions.
In the case of Europa/Champions League you only get to compete if you get invited. If their rules state that you won't get in if you don't stick to FFP then what has that got to do with the Court of Justice?
They're not saying you are forbidden to invest in the team, in fact you are perfectly within your rights to pump millions upon millions into them if you want. However if you want an invitation to the European competitions then you will have to play by their rules.
I see no issue with that whatsoever.
The court would have no business deciding who they should or should not invite into their competitions.
Re: Very interesting article on Financial Fair Play
Indeed. They're not saying that it is forbidden to invest in a team.
But they are saying that investment in a team will be penalised. And that is a restriction on trade based on economic measures rather than on sporting measures and it therefore becomes an issue that falls within the jurisdiction of the European Court of Justice.
Indeed. They're not saying that it is forbidden to invest in a team.
But they are saying that investment in a team will be penalised. And that is a restriction on trade based on economic measures rather than on sporting measures and it therefore becomes an issue that falls within the jurisdiction of the European Court of Justice.
Re: Very interesting article on Financial Fair Play
Spursalot - I refer you specifically to this paragraph from the article:
The message couldn't be clearer. If anyone challenges FFP, the chances are very high that the European Court will find in their favour.
The guy who wrote this article is experienced and expert not only in the field of European competition law but specifically in relation to sports.
Spursalot - I refer you specifically to this paragraph from the article:
The message couldn't be clearer. If anyone challenges FFP, the chances are very high that the European Court will find in their favour.
The guy who wrote this article is experienced and expert not only in the field of European competition law but specifically in relation to sports.
jts1882
Dean Richards
Re: Very interesting article on Financial Fair Play
I don't think that is correct.
In the US the overall business is the NFL, NBA etc and they can grant franchises. It's the Starbucks approach to sport.
But football, especially in the UK has been business for over a century. Our "club" has been a company since the late 1890s and we, unfortunately, pioneered the public company approach (which the FA foolishly backed by repealing their laws against it). The clubs are business entities and the leagues are the market. If the EU stand up to their free market principles they have to rule against FFP. But there is politics involved so they might not if UEFA and the national associations back the proposals.
I don't think that is correct.
In the US the overall business is the NFL, NBA etc and they can grant franchises. It's the Starbucks approach to sport.
But football, especially in the UK has been business for over a century. Our "club" has been a company since the late 1890s and we, unfortunately, pioneered the public company approach (which the FA foolishly backed by repealing their laws against it). The clubs are business entities and the leagues are the market. If the EU stand up to their free market principles they have to rule against FFP. But there is politics involved so they might not if UEFA and the national associations back the proposals.
Howard Webb
Clive Wilson
Re: Very interesting article on Financial Fair Play
I enjoyed chewing this article over, nice one!
I think the writer makes some leaps which undermine his thrust. He describes the anti competitive nature of FFP but most of these conditions already exist; smaller clubs will always be at a disadvantage if markets are the standard comparison and that is already the case. But to go further and say the problem is already catered for with the rules in place is not correct. Real Madrid and several clubs at the top of champions league football are heavily subsidised and regularly rely on bottomless funding despite ever increasing debt and this is partly what FFP is for. Rather than framing it as anticompetitive, its clearly a system which has existing problems in mind, rather than pointless additional beurocracy which could fall foul of the ECJ and is a solution to both the sugar daddy issue and the tax payer subsidy one too, and this goes to the key point about the extent and legitimacy of FFP; its a root cause of the growing gap between big and small clubs.
The system feels like a giant wage cap but the emphasis is on clubs spending what they don't have, as well as inflating a market every time a shiek or oligarch fancys redistributing his/her revenues and paying slightly average players over £150,000 a week without pause for thought. Existing rules are clearly inadequate.
Or sumfink
I enjoyed chewing this article over, nice one!
I think the writer makes some leaps which undermine his thrust. He describes the anti competitive nature of FFP but most of these conditions already exist; smaller clubs will always be at a disadvantage if markets are the standard comparison and that is already the case. But to go further and say the problem is already catered for with the rules in place is not correct. Real Madrid and several clubs at the top of champions league football are heavily subsidised and regularly rely on bottomless funding despite ever increasing debt and this is partly what FFP is for. Rather than framing it as anticompetitive, its clearly a system which has existing problems in mind, rather than pointless additional beurocracy which could fall foul of the ECJ and is a solution to both the sugar daddy issue and the tax payer subsidy one too, and this goes to the key point about the extent and legitimacy of FFP; its a root cause of the growing gap between big and small clubs.
The system feels like a giant wage cap but the emphasis is on clubs spending what they don't have, as well as inflating a market every time a shiek or oligarch fancys redistributing his/her revenues and paying slightly average players over £150,000 a week without pause for thought. Existing rules are clearly inadequate.
Or sumfink
Re: Very interesting article on Financial Fair Play
Any club with a new, multi billionaire owner which wants to compete at the very top but which finds its path blocked by the vast and insurmountable financial superiority enjoyed by the existing elite.
Any club with a new, multi billionaire owner which wants to compete at the very top but which finds its path blocked by the vast and insurmountable financial superiority enjoyed by the existing elite.