Manchester City and Financial Fair Play


What is Financial Fair Play?

The desired aim of Financial Fair Play (FFP) is to prevent clubs from spending more money than they earn to protect them from getting into financial difficulties and to ensure the sustainability of European club football.

For those clubs that qualify for European club competitions, FFP is governed by EUFA. However, individual football authorities also have their own FFP rules, so the Premier League has its own rules, as does the Championship and so on.

The general premise is to put a limit on the maximum losses a club can make over a certain period:
  • UEFA say losses can be a total £30 million over 3 years
  • The PL say losses can be a total of £105 million over 3 years
  • The Championship say losses can be a total of £39 million over 3 years
As a result of FFP, UEFA reported that combined club operating profits had risen to €600 million in 2017, compared with combined losses of €1.7 billion in 2011 before FFP was introduced. Similarly, before FFP in the Premier League, 8 out of 20 teams made a profit, by 2017 that number rose to 18 clubs making a profit.

These sorts of statistics show that FFP is working, however, there are also several criticisms of the negative impact FFP is having on football. Clubs are constantly trying to find ways of legally getting around the rules, UEFA’s enforcement of the rules are not exactly transparent, and FFP is creating a bigger gap between established ‘big clubs’ and other teams.

What happened with Manchester City?

Manchester City Football Club (MCFC) are set to commence their appeal against UEFA’s ban before the Court of Arbitration for Sport tomorrow.

An investigation was launched following several leaked documents, most notably emails and accounting documents appearing to show that MCFC’s owner Sheikh Mansour was mostly funding Etihad’s huge £67.5 million annual sponsorship package himself. If this is the case, then it means MCFC were falsely exaggerating their commercial income from sponsorship to ‘comply’ with FFP.

In February this year, the Club Financial Control Body Adjudicatory Chamber (the body that makes judgments regarding UEFA’s FFP rules) found that MCFC had committed “serious breaches” by overstating its sponsorship revenue in its accounts and the break-even information submitted to UEFA between 2012 and 2016. Furthermore, they found that MCFC had failed to cooperate with the investigation. This led to the Chamber imposing a fine of €30 million and a two-year ban from all UEFA club competitions.

The Court of Arbitration for Sport is where most appeals against decisions made by sporting associations (like UEFA in this case) are heard. MCFC are likely to argue that:

  • The investigation looked at evidence from certain years it should not have (because MCFC and UEFA already had a ‘settlement agreement’ relating to those years).
  • The alleged breaches happened over 5 years ago which creates an issue over time limitations for prosecution.
  • The fact that the evidence potentially used by UEFA came from leaked sources means it is not reliable and therefore not admissible.
  • There was an issue with further leaks from within UEFA to various media outlets about the ongoing investigation which may have affected the procedure and the impartiality of judgments.
  • The proportionality of the ban (a two-year ban might be excessive, as was the case when AC Milan appealed against their judgment from UEFA, however, the facts were different, and this may not be the same for MCFC).

If the ban is upheld by CAS, it seems likely that the Premier League will also launch their own investigation in MCFC in relation to the Premier League’s own FFP rules.

MCFC may either accept the outcome or they could take further legal action against the fairness of FFP itself, maybe going as far as the European Court of Justice, on the grounds that FFP is not compatible with EU competition law.

What does the future hold for FFP?

Although the European Commission has supported FFP and the Court of Arbitration for Sport also suggested that FFP was compatible with EU law in the case of Galatasaray v UEFA in 2016, no club has gone as far as challenging FFP before the Commission or national/European courts.

There may be an argument that there is unequal treatment in the way UEFA enforces FFP. In some cases, UEFA comes to a ‘settlement agreement’ with the club (like with MCFC the first time, PSG, and Inter Milan), however, in other cases, UEFA sanctions them without even offering a ‘settlement agreement’ (like with Dynamo Moscow, AC Milan, and MCFC this time). This seemingly arbitrary method of enforcement and lack of transparency would likely go against UEFA in the eyes of the Commission.  

In any outcome, there are also good reasons for relaxing FFP rules too. Recently, Arsene Wenger, who is now Head of Football Development at FIFA summarised the problem by stating “FFP prevents emerging clubs who want to invest from doing so”. FFP benefits the historically ‘big clubs’ who are already making a larger income from worldwide sales, more tickets, lucrative sponsorship deals, greater broadcasting revenue, and so on. This means they can continually spend more as a result and continue their dominance, especially in the Champions League. It prevents large investment by a wealthy backer changing the fortunes of a small or medium-sized club.

Whether change comes from an external legal challenge or from an internal reform, it seems likely that change to FFP will happen in the future. If their takeover goes ahead and FFP is relaxed, Newcastle Utd may be the next team to watch out for!

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