OFFICE BUSINESS AFFECTING THE SHOW ON FIELDS – FOOTBALL, BIG MONEY & FFP (FFP Series-2)
This post is second in the FFP Series by Extra-Cover and has been authored by Umang Chaturvedi and Ayush Yadav.
Umang is a third-year student of the B.A. LL.B. undergraduate course at the Rajiv Gandhi National University of Law, Punjab. He has explored his interests while interning with Krida Legal's Sports & Gaming Laws team and is currently interning with the Sports division of Atharva Legal LLP, Delhi. Additionally, he is an avid Los Angeles Lakers fan.
Ayush is a third-year student of the B.A. LL.B. undergraduate course at the National Law University, Nagpur. He has a keen interest in football and can be found supporting Manchester United if not playing as a defender himself.
FOOTBALL AND MONEY - INTERPLAY
Club football over the years has become a blend of entertainment, showbiz, and widespread viewership, with which comes a massive amount of support to the football clubs. However, this principle tends to get diluted when a primary shift occurs from a team-based fan following to a player-specific fan following. There seems no harm in supporting an individual player but a peculiar issue arises when the said player leaves one club for another and with him takes attached benefits like image rights, media rights, and a huge fan base. This in turn causes enormous losses even to the clubs that have a strong economic base.
From the perspective of a business, football with its ever-growing popularity lures big business houses to invest in teams/clubs and make huge profits. As a consequence, the ethics and competitive balance of the sport have been lagging ever since. What started as a purely skill-based game on the field is now played within the four walls of offices; players have been replaced and the game is now dominated by businessmen.
Therefore, the inception of stringent economic policies for keeping the sanctity of the game is of the utmost priority. The above-mentioned objective should be achieved to appropriately regulate and manage the league. To restrict and keep a check on the interference of owners in the economic matters of the club, the Union of European Football Association (“UEFA”) in the year 2011-12 rolled out Financial Fair Play (“FFP”) in its football ambit.
FFP intends to regulate the expenditure of every qualifying club with regards to the transfer fees and weekly wages of players. For the adequate implementation of FFP, the UEFA Club Financial Control Body (“CFCB”) was appointed as a watchdog. Previously, with support from the deep pockets of the owners and financial backing, clubs used to spend money rampantly without carrying any burden of financial distress. FFP thrives to strike a balance between the club’s income and expenditure. To prevent the excessive outflow of money, UEFA sets a bar beyond which a club cannot spend.
Article 58 of the FFP defines the relevant income and expenditure, while Article 60 calculates the ‘break-even’ by deducting relevant expenses from the relevant income. The clubs generate their revenue from a non-exhaustive list including broadcasting rights, gate fees (ticket price), advertisements, and sponsorships, etc. Each qualifying club must first pass this break-even point to proceed further in the competition. To pass the break-even test, clubs must not spend beyond €5M, exceeding their earning/revenue. However, the limit can reach up to €30M (earlier €45M) if such amount is facilitated by the club owner(s).
Further, this piece analyses the impact of big money transfers on the youth, their career, and how UEFA must regulate its policies to bridge the inequality gap between big and small clubs in terms of their financial status. These principles are mandatory to maintain the standards of any competitive sport and shall be the focus of respective governing bodies.
FFP BREACH – REVISITING THE CASES OF AC MILAN AND PSG
The breach of FFP and interplay of big-money backed by deep financial pockets are again in relevance. In context with the recent judgment of the Court of Arbitration for Sport (“CAS”) between UEFA and Manchester City, the appeal filed by the latter for the revocation of a 2-year ban was successfully accepted by the Swiss court. The bone of contention in the matter among other irregularities also included Article 56 concerning co-operation with UEFA, which states that a club must;
“Cooperate with the licensor and the UEFA Club Financial Control Body in respect of their requests and enquiries.”
However, throughout history, matters of grave importance have come across UEFA and CAS, making it crucial to revisit the same in light of the recent sigh of relief to City.
In the past, the Italian giant AC Milan was handed a two-year ban from European competitions by UEFA for breaching the FFP rules mid-season from 2015-17. After spending €200M, former owner Li Yonghong was unable to repay the loan. However, with the acquisition by the Elliott Management Corporation the club management successfully persuaded the Court in getting a relief and balance their books until June 2021. As a result, the ban was reduced to one year. Such influence of big investors does less good to big clubs than it causes harm to the small clubs. It hampers the growth of financially or strategically small clubs that are unable to compete and prove their worth at bigger events due to innumerable factors.
In another escape history specific to Paris Saint Germain (“PSG”), the FFP was flouted and breached during the 2017-18 season. PSG is one of the biggest names in European football with the influence of Qatar Sports Investment (“QSI”) as it is owned by Tamim bin Hamad Thani, the ruler of Qatar. The club escaped UEFA’s FFP breach after signing Neymar for a world-record fee of £198M and right after that Kylian Mbappé, another promising youth for £116M in the subsequent season. After the second purchase, PSG was accused of breaching FFP rules. The investigation carried by the UEFA concluded that the expenditure was balanced by Qatar Airways, a sister company of QSI, who was the prime sponsor of PSG. Under the garb of sponsorship, the wealthy ruler (riches acquired via the vast oil reserves) kept injecting money through which the club could spend loads of money to buy more top-class players.
On 22nd June 2018, the Chairman of UEFA CFCB ordered to review the decision, after which PSG filed an appeal against the order, stating Article 16(1) of the Procedural rules specifically mandate that the UEFA CFCB may instigate a review at the initiative of the Chairman only within 10 days of the latter receiving the final order from the Chief Investigator and not beyond that. Due to this lacuna under Article 16(1), UEFA could not penalize the club. However, in no time it was realized that there are loopholes in Article 16(1) of the FFP Rules which affected the investigation and hearing. Subsequently, it was advised to UEFA that they must amend the questionable provision to protect the interests of the football community against the financial doping but no substantial step has been taken yet.
IMPACT OF BIG MONEY TRANSFERS ON YOUTH
With the influx of money from the owners, the clubs prefer to invest in young talented academy players who are not only ready to serve them for a longer period but can help the clubs to attract potential sponsors and investors. To lure these young talents, owners and management often throw deals at them that include unexpectedly high remunerations. Consequentially, the inexperienced players often succumb to these high expectations, which inadvertently has adverse effects on the development of their game later. It has been a trend for some time in the world of football, wherein agents (for their gains and personal favors) often negotiate deals that go against the interests of young footballers associated with them.
In 2008, a young and promising Brazilian striker, Robinho was bought by Manchester City from Real Madrid for £42M. He was compared with the likes of Pele in the initial days of his career. However, what looked like a promising deal for him proved to be detrimental in his development as it turned into an ephemeral career. Failing to justify his talent in the English league, he was soon loaned out to his home club, Santos.
Luckily, he was revived by the Italian giants A.C. Milan who bought him for a minimal value of £15M, compared to his initial purchase. Unfortunately, his performance was shadowed by another robust center-forward Zlatan Ibrahimović. Failing to find a place in the regular starting 11, Robinho paved his way to the Chinese Super League (“CSL”) on a six-month contract with Guangzhou Evergrande Taobao F.C. On the expiration of his term, he was a free agent and was forced to return to his country. The decline in his career was further aggravated when he was found guilty of sexual assault of a 22–year-old Albanian woman in a disco club of Milan for which he was handed nine-year imprisonment.
Jack Rodwell, joined Manchester City at the age of 21 and was hyped to become an all-time great in the near future. However, he was never able to live up to the expectations of £12M, which was his initial fee. The list goes on and includes the likes of Oscar dos Santos Emboaba Júnior, who during his prime at just 25 years of age decided to move to the CSL from the reputed English League. His move is still considered as a downgrading one in terms of competitive standards.
Due to the inexperience and incapacity to handle big money and fame, young players often get trapped in this loop of controversies. A higher bid from clubs surely makes way for their name in the market with grandeur and pompous but it also creates a performance pressure on the athlete. At times, these big money transfers eventually turn out to be fatal for the growth of young talents.
The reliance on the deep pockets of club owners through their private companies is flawed at multiple levels. It not only violates the FFP but is also advantageous to the big clubs as they never run out of money. Additionally, the transfer of renowned players to clubs brings in attached benefits which include, but is not limited to an increase in stock prices, better merchandising, jersey revenue, media rights, and other similarly placed rewards for the ‘transfer-in’ clubs. A huge fan base shift is also predicted due to the individual’s popularity and bandwagoners. These theories and predictions were proven correct in the whopping and surprising purchase of Ronaldo by Juventus in the year 2018, where one player single-handedly increased the monetary benefits of an already established club.
With the money coming into play, fair play is at stake. Competition is getting concentrated as financially small clubs are getting diluted specifically due to no monetary backing. Monaco won the Ligue 1 before Mbappé left for PSG, but the team now sits at a dismal ninth position, majorly due to losing their star player. There are other multiple examples when a player is transferred to a bigger club and the smaller ones are left adversely affected by the deal. French club Lyon and its striker Lacazatte are just other examples.
There is an urgent need for a case to case basis treatment of making the rules more stringent because the rich and powerful clubs always find a way out eventually. Additionally, the advised amendment to Article 16(1) has yet not been processed through, due to the lackadaisical approach of the governing council. After majorly being on the back-foot in the PSG’s breach case, the onus of due caution anyway lies with the governing council. Conclusively, it is now at the hands of UEFA to control club football on the field and within the precincts of the offices.
Cite as: Umang C. & Ayush Y., Office Business Affecting the Show on Fields – Football, Big Money & FFP , Extra-Cover: The Sports Law Blog of India (1st September 2020), Accessed at https://www.extra-cover.org/post/office-business-affecting-the-show-on-fields-football-big-money-ffp-ffp-series-2 [Date of Access].