HomeSponsorship & MarketingFootballEurope

Matthew Glendinning | Reports of FFP’s demise after City ruling are exaggerated

Matthew Glendinning, editor of SportBusiness Sponsorship, believes Uefa’s Financial Fair Play rules will survive even after the Court of Arbitration for sport overturned the governing body's competition ban on Manchester City.

Matthew Glendinning

Yesterday the Court of Arbitration for Sport ruled that Uefa could not impose a two-season European competition ban on Manchester City for alleged transgressions of its Financial Fair Play (FFP) rules and that a €30m ($34m) fine should be reduced to €10m.

I know I was not alone in thinking the decision would go the other way, perhaps with the compromise of a one-year ban.

Indeed, my immediate feeling on hearing the news was that justice had not been served. This was coloured by the knowledge that City had previously held sponsorships of inflated value – investigated by Uefa under a previous FFP ruling – to help fund its transition from Premier League also-rans to title winners at the start of the 2010s.

Some people, not least those affiliated to rival clubs, felt they ‘got away’ with a €60m fine (with two-thirds returned if the club fulfilled certain Uefa-specified measures) in relation to the investigation in 2014 – a relatively small amount for such a huge club. And the same people will feel they have gotten away with it again thanks to yesterday’s ruling.

It’s easy to understand why they would think the next logical step is simply to tear up FFP and start again.

On reflection, however, I think reports of FFP’s death on twitter – #RIPFFP – are exaggerated.

Here’s why. Without getting into legal niceties – and the full written judgement will be revealed this week – CAS said there was insufficient conclusive evidence against the central allegation that City disguised equity funding as sponsorship contributions. CAS also said that many of the alleged breaches were time-barred.

Unfortunately, according to Uefa’s own rules, FFP investigations cannot be re-opened after five years. Uefa may one day make changes to these rules to admit new evidence, but that’s the end of the line as far as City is concerned. The more dramatic allegations from Der Spiegel’s report in 2018, notably that City owner Sheikh Mansour majority-funded the Etihad deal, won’t stick.

This does not mean Uefa can’t win cases like this in the future and the very fact Uefa was prepared to go this far with a powerful club will give other clubs pause.

FFP works in many ways. It has already stopped some of the most egregious examples of using sponsorship over-payment as a means to balance the books. Remember, City received the first fine in 2014, in part, because it signed second-tier sponsorships with brands like Etisalat and Abu Dhabi Tourism at multiples of the real market value. Uefa said these deals cannot be increased on renewal.

PSG, which was also fined by Uefa for breaches in 2014, made a deal with the Qatar Tourism Authority worth nine-figure euros in 2013 but was told by Uefa to decrease the amount it could claim from the sponsorship to eight-figures. Still silly money but not a sum that would transform the club’s buying power.

There remains a problem in overseeing the valuation of the bigger media-based deals, such as City’s main shirt, stadium and campus deal with Etihad, worth about £67.5m (€75m/$85m) per season, which was supported by Nielsen’s QI media values. These are difficult to categorically disprove even if they overshoot the benchmark market value for similar deals.

The irony is that a split of £40m per year for the main shirt deal, £10m for stadium naming rights and £15m or so for campus-related and other rights doesn’t look so crazy today now that City has won the league four times since 2011-12. It’s just that it was signed at a time when Nike was paying under £10m per year for the kit rights, which are now worth £50m per year with Puma.

There’s a case to be made that Uefa was too lenient with its fines from 2014, but FFP has subsequently policed European football’s most systematic abuses. If, for the sake of argument, a Saudi government agency came in today and bought Newcastle United, then signed off a £25m per year shirt deal with Saudi Airways, they will, at least, have to justify the deal by media value.

Most big clubs have a wealthy backer and owner-related sponsorships are common, but that doesn’t mean they will be any less scrutinised. More importantly, the days when the likes of Roman Abramovich could wield a cheque book over everything have gone.

Finally, one must concede that Uefa has to govern the clubs with the clubs’ consent. We’ve seen Uefa relax some FFP rules to allow owners to put more money into their clubs to cover losses caused from the Covid-19 pandemic.

Taking the most punitive stance for breaches of regulation could force clubs into line but could also see Uefa lose some of its influence over the clubs. The administration of European club football is a political game. Uefa lost a hard-fought match this week. That’s disappointing – some would say infuriating – but that’s all it is.

Most recent

In the face of severe fiscal losses after the coronavirus pandemic, SportBusiness asked sports industry insiders what they think the prospects are for rights-holders, and what must be done to emerge from the Covid-19 crisis stronger than before.

Second of a two-part report from the APOS 2020 Virtual Series, the online incarnation of the leading Asia-Pacific media, telecoms and entertainment industry conference hosted by Media Partners Asia.

NFL team the San Francisco 49ers are ready to play an active role in helping Leeds United become a Premier League force both on and off the field following the club's promotion to English soccer's top flight. SportBusiness speaks to 49ers Enterprises president Paraag Marathe.

Brendan Flood, chairman of the Global Institute of Sport (GIS), University Campus of Football Business (UCFB) and director at Burnley FC, explains how now, more than ever, the global sports industry must innovate to adapt to the global climate, and how specific knowledge and education is central to that