Gaming the Beautiful game

Earlier this year UEFA opened an investigation into Manchester City for alleged financial fair play (FFP) violations. This investigation was prompted by publication by German News magazine Der Spiegal of a series of claims, based on leaked documents, that the club violated FFP rules.

Manchester City deny these allegations releasing an official statement: “Manchester City welcomes the opening of a formal UEFA investigation as an opportunity to bring to an end the speculation resulting from the illegal hacking and out of context publication of City emails. The Club’s published accounts are full and complete and a matter of legal and regulatory record”

Der Speigal alleged that Manchester City had deceived European football’s governing body. If the claims are proven UEFA’s chief FFP investigator Yves Leterme said City could face a Champions League ban if claims are proven.

What is Financial Fair Play?

Europe’s biggest football clubs have spent fortunes in an effort to dominate domestic leagues and achieve success in the Champions League, Europe’s premier competition. Paris Saint-Germain paid a combined €422m to acquire two players, Neymar and Mbappe, in 2017. Inter Milan spent €200m on transfers in the 2018/19 season in a doomed attempt to qualify for the Champions League whilst Juventus pay an alleged €85m per year on Christiano Ronaldo’s salary alone.

Financial fair play is about improving the overall financial health of European club football. It was approved in 2010 with first assessments in 2011. Since then clubs that have qualified for UEFA competitions have to prove they do not have overdue payables towards other clubs, their players and social/tax authorities throughout the season.

Since 2013, clubs have also been assessed against break-even requirements, requiring clubs to balance spending with revenues and restricting clubs from accumulating debt. In assessing this, the independent Club Financial Control Body (CFCB) analyses each season three years' worth of club financial figures, for all clubs in UEFA competitions.

Clubs can spend up to €5million more than they earn per assessment period (three years). However, it can exceed this level to a certain limit, if it is entirely covered by a direct contribution/payment from the club owner(s) or a related party. This prevents the build-up of unsustainable debt. The limits are: • €45m for assessment periods 2013/14 and 2014/15 • €30m for assessment periods 2015/16, 2016/17 and 2017/18

Has FFP worked?

UEFA president Aleksander Ceferin has declared FFP a success ushering in a period of fiscal prudence to the game. Whilst the transfer fees and wages detailed above tend to counter this argument, it is certainly true that UEFA clubs made a combined profit of €600m in 2017 compared with combined losses of €1.7bn in 20111, the year the rules were introduced.

Manchester City fans would argue their mage-rich owners have the right to spend whatever they wish on the club. Sheikh Mansour, City owner, certainly has the money to had Guardiola half a billion pounds to construct his all-conquering squad and, he appears to be I it for the long haul.

However, there are other clubs who have spent beyond their means and left on the brink of ruin. UEFA insist they want all clubs to spend in relation to what they generate to ensure a more sustainable model. City’s recently published accounts suggest they do just that recording revenues of £500.5m, representing a 44% increase in five years and a fourth straight year of profitability.

It is claimed that FFP creates a closed shop for established clubs in European football, stamping out the ambition of those who want to break into it, ensuring the rich clubs gets richer. Others claim it prevents prospective owners from playing fast and loose with clubs with generations of heritage that can be wiped out the moment the money runs out.

The Allegations

Der Spiegal claims that City had numerous methods of disguising the vast sums of investment from their Abu Dhabi owners to avoid FFP penalties. It is claimed they artificially inflated sponsorship, with a £67.5m deal with Etihad alleged to have included £59.5m-worth of investment from Sheikh Mansour- owned Abu Dhabi United group.

Other allegations detailed a secret project dubbed ‘Longbow’, which involved selling off image rights to a company alleged to be funded by the same group.

Will FFP Succeed?

Does UEFA have the teeth and resources to challenge and succeed against these financial behemoths? In recent times, the biggest clubs have increasingly chosen to fight the rulings of the body. Paris Saint-Germain and Galatasaray took their cases to the Court of Arbitration for Sport (CAS), where they won on procedural grounds.

Last year, AC Milan overturned a season-long ban from European competition after CAS accepted the club’s argument that the punishment was disproportionate. Whilst each case is different a common thread is the clubs’ determination not to accept the authority of the FFP regime. Teams with significant resources employ legal teams to fight UEFA decisions or use creative schemes to avoid punishment for overspending. Their objective to avoid rich clubs not to ‘buy success’ was not helped by their own decisions in 2014 to punish City and PSG for breaches of FFP rules with fines!

This current high-profile Manchester City case could prove to be the acid test as to whether the FFP survives or whether the strict break-even requirements are scrapped. UEFA denies such actions are likely but continual losses to heavily funded clubs undermines the regime and perpetuates the situation where the big clubs can simply act however they want.

#Football #FairPlay

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