HomeFinance & LawFootball

Doug Harmer | FFP: Strong leadership is now required by Uefa

In light of the recent developments concerning CAS's decision to overturn Uefa’s two-year Champions League ban on Manchester City, Doug Harmer, partner at Oakwell Sports Advisory, discusses the role of Uefa and navigating the fiscal challenges of a post-lockdown world

Doug Harmer

The decision made by the Court of Arbitration for Sport (CAS) to overturn Uefa’s two-year Champions League ban on Manchester City is the latest high-profile reversal of its efforts to uphold FFP regulations. The reduced fine still acknowledged Manchester City had broken rules by its failure to cooperate with the investigation. More serious findings, true or not, were inadmissible due to Uefa’s regulatory five-year limit.

Evidence that contributed to the initial ban – primarily the disguise of equity funding as sponsorship contributions – was deemed insufficient to uphold all conclusions.

Uefa had already fallen foul of its own statutes of limitations before, with a similar CAS ruling in 2019 for Paris Saint Germain. Then, the adjudicatory arm of Uefa’s financial control body was found to have breached its own rules as any investigation re-opening had to be initiated within ten days of the ruling. Uefa took two months.

As Uefa doubles down on its commitment to FFP, the question remains: are procedural irregularities and conduct diluting the impact of regulations? Or do the regulations themselves need revising?

Established in 2009, and implemented from the 2011-12 season, current rules were intended to encourage clubs in the Champions and Europa Leagues to live within their means and not pay excessive player salaries. Clubs’ maximum losses were limited to €30m ($34m) over three years, if €25m of the losses were covered by owners. The catalyst was a 2009 Uefa report showing 50 per cent of European clubs suffered losses in the previous year, with 20 per cent of those believed to be in financial peril.

Since the inception of the regulations, many clubs have fallen foul of them. From the lower tiers: Levski Sofia, FK Vardar, Maccabi Tel Aviv, Fenerbahçe, Besiktas, Trabzonspor and Galatasaray. From the upper echelons: AS Monaco, AS Roma, Inter Milan, AC Milan, PSG and Marseille.

Uefa’s available sanctions include withholding prize money, transfer bans, and disqualification from European competitions. Manchester City was set to lose around £200m (€222m/$254m) in Champions League payments and crucial squad/backroom personnel.

Whilst well-intentioned, FFP regulations have been heavily criticised for four main reasons: consolidating the haves/have-nots; not reflecting regional disparities; obliterating a competitive balance; and accelerating momentum to a European Super League.

The have/have-nots argument is clear. Tying regulations to revenue is seen to favour Europe’s big clubs who have established commercial appeal and income streams. Arguably, Manchester City/PSG’s strategy – investments and sponsorship linked to state ownership – was the only option available to break into the established oligopoly. Post-Covid-19, and with a disrupted broadcasting/media-rights landscape, uncertainty for smaller clubs and leagues becomes more acute.

By restricting amounts owners can inject, those with grander aspirations are stifled. In the words of a former Premier League Chairman: “Universal financial regulation ensures teams are stuck in their ‘rightful place’ for good.”

On FFP’s failure to recognise regional disparity, each European league distributes revenue amongst its participants differently.

LaLiga’s centralised model has increased overall income generated, and the subsequent flow to many clubs. However, Barcelona and Real Madrid’s share is still double that of fourth-placed Sevilla. In the Premier League, distributions are more equitable, based on league position. However, income disparity between the leagues is enormous with relegated Cardiff City generating £10m more in broadcast revenue than Italian giant AC Milan.

Competitive balance is also affected. There is clear correlation between financial resources spent on players and a team’s success. When owner/club ambitions are suppressed by financial regulations, competitions as a product become predictable and less engaging to consumers.

Finally, and perhaps most dramatically – the potential momentum to a Super League.

The Premier League generated €1.9bn in revenue from the current domestic broadcasting rights cycle, compared to the Bundesliga’s €1.2bn. When the market dictates the value of a league’s rights and FFP places restrictions on clubs’ spending, it is unsurprising that unrest exists at top European clubs. In leaked emails published by Der Spiegel, it was suggested a Super League of 18 clubs, with €500m per club, per season, would almost double Real Madrid’s total broadcast income. Such a competition would either sit outside Uefa’s jurisdiction, or transform the governance structure under which football currently operates. FFP would be dead and breakaway clubs could spend windfalls with little regard for clubs left behind.

Despite the criticism and these four compelling arguments, FFP has still contributed to making clubs more financially sustainable. Recent Uefa data shows European clubs made a combined profit of €140m in 2018 compared to losses of €1.16bn in 2009. No small feat.

The Premier League has experienced a material reduction in revenues spent on salaries – from 71 per cent (2012-13) to 59 per cent (2017-18). Despite recent losses at CAS, FFP was responsible for stopping and imposing sanctions (monetary and transfer caps) on both Manchester City and PSG in 2014 for egregious examples of sponsorship overpayments.

Critics may have labelled FFP toothless, but the fact Uefa has been prepared to go so far with one of Europe’s most powerful clubs should at least make others take note. FFP has had a positive impact on the overall sustainability of European football. Is it perfect? No. But perfect should not be the enemy of good.

Uefa’s willingness to review current parameters in the face of Covid-19 means there is an opportunity for collective and collaborative discussions with clubs as to changes required to ensure future best-practice.

To fulfil its obligations to all members, Uefa must review its administrative process and ensure there are sufficient resources (human and financial), to police the European club ecosystem effectively.

Now, more than ever, strong leadership by Uefa is required to navigate the challenges of a post-lockdown world.

Most recent

Logistics brand DP World entered into a long-term deal with IPL franchise Royal Challengers Bangalore in 2020 and become title sponsor of Renault's F1 team, building on its existing sponsorship of the European Tour. Daniel Van Otterdijk, chief communications officer for the company, explains how each deal supports its objectives.

The influence of traditional sports executives is growing at esports rights-holders, leading to deeper partnerships with legacy media companies. Callum McCarthy reports.

SportBusiness speaks to Cricket Australia’s national commercial development manager Phil Rigby about how, in spite of the challenges of the Covid-19 pandemic, the organisation is confident about its sponsorship prospects. Tom King reports.

In SportBusiness' latest webinar, top industry executives came together to discuss the role of technology, fan engagement, and data in sports sponsorship. You can watch the webinar for free here.