Loyola University Chicago School of Law, JD 2021
In the past 12 years, Manchester City has seen a dramatic rise to the European Elite. In 2008, Sheikh Mansour, who has ties to the United Arab Emirates’ royal family, took over ownership of the club. Following the take-over, Manchester City has gone on to win 10 major trophies. On February 14, 2020, Manchester City was handed a two year ban on European competitions, as well as a $32.5 million fine. This is the largest fine ever by Union of European Football Associations (“UEFA”), the governing body of European Football. The UEFA found that Manchester City overstated its sponsorship revenue in its accounts. This, according to the Adjudicatory Chamber of the Club Financial Control Body, is a “serious breach” of Licensing and Financial Fair Play. If the ban is upheld, Manchester City would be fined approximately $232.5 million, a sum of the initial fine plus potential winnings in European Football competitions. According to Simon Chadwick, director at the Centre for the Eurasian Sport Industry, “UEFA must win this ban, if it doesn’t then its position on Financial Fair Play beings to unravel.” This is a pivotal moment in UEFA’s history as a governing body.
Financial Fair Play basics
So what is Financial Fair Play (“FFP”)? In simplest terms, it is a means to regulate clubs that qualify for European competitions to not spend beyond their means. FFP was established by UEFA to make sure that football clubs were not spending more than they earned and, in doing so, prevent clubs from falling into financial troubles that may endanger their long-term survival. FFP forces clubs to balance football-related expenditures, transfers, and wages, with television and ticket income, plus revenues raised by their commercial departments. Money spent on stadiums, training facilities, youth development or community projects is exempt from the calculation. In addition, FFP permits losses of up to 30 million euros, so long as the Club is able to cover the loss via other means. Michel Platini, former UEFA President, said “fifty percent of clubs are losing money. We needed to stop this downward spiral.”
FFP comes in two forms: the first is UEFA FFP, which is at issue here, and the second is the Premier League FFP, which closely mirrors that of UEFA. Under the Premier League FFP, a club can lose between 15 and 105 million euros, so long as it is guaranteed by clubs’ owners to be covered.
Punishments for non-compliance can be severe. Current FFP rules allow for eight separate punishments to be taken against a club. Those punishments are as follows, and are ranked in ascending order of severity:
- Reprimand / Warning
- Points deduction
- Withholding of revenue from a UEFA competition
- Prohibition to register new players for UEFA competitions
- Restrictions on how many players a club can register for UEFA competitions
- Disqualification from a competition in progress
- Exclusion from future competitions
Impact of wealthy owners on FFP
Many of the top European clubs are owned by massive companies and wealthy owners. Liverpool F.C. is owned by Fenway Sports Group, Manchester United is owned by Malcom Glazer. As a result of these wealthy owners, the clubs have been able to spend more than they earn, thus navigating around FFP. According to UEFA, if a club owner has injected money into the club through a sponsorship deal with a company they are related to, UEFA will investigate and, should the situation permit, adapt the calculations of the break-even result for the revenues to the level that is appropriate (‘fair value’) and consistent with market prices.
Turning back to Manchester City, which is owned by Sheik Mansour, over $1 billion has been spent on player purchase, drawing criticism from other clubs and UEFA. This is the exact purpose of FFP. It is specifically designed to stop clubs’ wealthy owners from pumping their own money into the club to cover for the losses.
What is the Future of FFP and the Manchester City Ban?
This ban brings a major threat to the future of the Manchester City organization. The manager, Pep Guardiola, has a contract that expires at the end of this season and may leave now knowing that he will be unable to compete on the biggest stage for club football. There is also a possibility that some players will leave the club as well, as the lack of a possibility of playing may force them to take their talents elsewhere. However, this is all speculative. The ban does not take effect until next season, and is subject to reversal by an impartial court. If nothing else, the fact that UEFA were willing to not only reprimand Manchester City, but remove them from competition, sends a big message to the world of football that they are taking these kinds of violations seriously. This would set a new precedent, and, in doing so, shift the powers of European football in the next few years.