Soccer / Financial Fair Play

The Huge Clubs Stay Huge? That’s Unfair

Gareth Bale’s transfer fee and Monaco’s expense list testify to the fact that the gaps in European soccer are steadily growing. Michel Platini’s financial fair play plan doesn’t seem to be working

Soccer is perhaps the game of the masses, the game in which the impossible happens time and again, but the days when Steaua Bucharest, Red Star Belgrade or Nottingham Forest were European champions are long gone. Most clubs hope to reach the Champions League groups stage at best.

The enormous financial gaps between the haves and have-nots stem directly from the gap between rich and poor, whether the wealth is a result of tradition or an immense cash flow from a tycoon, oligarch or oil sheikh who has decided to toy with a soccer club. Most soccer lovers, whether part of the establishment or merely fans, are taken aback by these gaps, leading UEFA to declare a few years back a plan for financial fair play — an effort to regulate financial balance and prevent a sharks vs. fish reality.

Fines, penalties and warnings were issued already last season, even against Maccabi Netanya. Eventually, Netanya's penalty was cancelled after it managed to pay its debts. Many other teams have faced similar situations. In effect, this summer was to have been the last summer before more substantial steps were to be taken, but pressure from elite clubs caused the regulations’ postponement for two further years, pushing them back to 2015.

Still, when clubs like Monaco, Paris St. Germain and Manchester City are off on a summer shopping spree, critics doubt if the fair play plan is having any effect at all. Arsenal coach Arsene Wenger probably had a point when he reacted to the £85.3m transfer fee for Gareth Bale by saying that "It makes a joke of the financial fair play regulations."

UEFA General Secretary Gianni Infantino is upset by such talk, not only because he hears it all the time, from everyone, but also because he feels that this approach reflects contempt from the clubs themselves. For precisely that reason, Champions League coaches and CEOs were summoned to Nyon, where they were received detailed explanations of fair play rules, together with a warning that this time EUFA means business.

Talking to the BBC recently, Infantino said: "These messages are out there, big clubs as well as small clubs, the rules are there. A year ago we warned that this is the last wake-up call for the clubs and that the rules have teeth.

"The break-even rule will go into force next season, taking into account the figures of this and last season. The clubs know the rules. If they haven't generated enough revenue to perform these transfers, then there will be sanctions — which could be a warning or a fine or a restriction on registering new players or, finally, a ban."

The object of financial fair play is, first and foremost, to neutralize the influence of private funds. When a Russian oligarch, American tycoon, Gulf oil sheikh or Asian billionaire decide to flood a team with cash, its bad for the sport, immediately damaging the local and European leagues, violating the balance. The plan is also aimed at curbing clubs’ financial irresponsibility — observed in all echelons of the game. In a way it is similar to limits the Bank of Israel wished to impose on bank accounts with overdrafts.

The goal is, of course, worthy, but despite EUFA President Michel Platini's impassioned speeches, the plan is problematic. Last week Platini told the Dutch daily De Telegraaf that statistics prove that the plan is already working: "In 2010, the top Europeans had a debt of €1.7 billion. The new vetting of over 700 European professional clubs has shown that debt has fallen to €1.1b. In 2011, there was talk of the top sides owing €57 million in unpaid salaries and bills to players, clubs and other taxes. That amount is now €9m."

Good news indeed, but Platini chooses to ignore the many loopholes making it virtually impossible to enforce financial fair play. Clubs are allowed to use revenues from sponsorships and commercial deals, but these are endless. Manchester United, for example, signs an array of deals such as "official equipment supplier" or "official media supplier in Bulgaria," creating more and more revenues.

Are these really “soccer related” incomes? There are pros and cons, but on the other side of Manchester the problem is even more acute. Four of Manchester City's eight leading sponsors are owned by the United Arab Emirates, where the club's owner, Shiekh Mansour, is the deputy prime minister — meaning he can obviously pull some strings. When Mansour decides to award the club hundreds of millions of dollars for changing the club's City of Manchester Stadium to Etihad Stadium, he is, in effect, pouring in money from his personal account. Platini and his staff have yet to find a solution to such situations.

Different tax rates in various countries are also a cause for worry. When a club in one country must pay 40 percent tax on its earnings, while in another country clubs are only required to pay 12 percent, the regulations are unjust. Furthermore, in England and France a small portion of the top league clubs’ profits are channeled to the lower leagues, a system that the rules do not take into account when calculating profits.

Still, the biggest problem of the proposed regulations is that the larger clubs, specially in England and Spain, are hogging immense profits from TV rights. Real Madrid and Barcelona enjoy a yearly nine-digit Euro profit from television rights alone. Add to that their merchandise market, their success in the Champions League and there you have it: Spain's big two, as well as a handful of English clubs, can continue to spend big because they generate the funds. A mid-table club in Spain will no longer be able to buy a player “on credit,” due to the new rules. This means that the gaps between the richer and poorer clubs may even grow.

Platini is a social democrat and a man who does seek justice. The huge financial gaps in soccer do influence the Champions League, as well as the local leagues, but financial fair play may not be the right way to tackle these gaps. Imposing a salary cap, a collective TV rights deal for each league, as well as limiting squads to 25 players and banning sponsorship deals with companies related to club owners, might be a more efficient way to put soccer back on the right track.

Reuters