UEFA Financial Fair Play – Explained

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Kylian Mbappe and Neymar Jr. play for French club Paris Saint Germain (PSG). Kylian Mbappe and Neymar Jr. are also two of the world’s most expensive players, which were bought by PSG in a span of two years. But how could the French club, afford two of the world’s most expensive players? Easy. They were bought by Qatar Sports Investments (QSI) in 2011, making them one of the wealthiest clubs in the world.

A few years ago in 2008, another Middle Eastern company, this one from Abu Dhabi took over the English club Manchester City. This acquisition and the subsequent investments from the owners helped City rise from their mid-table status into one of the most successful and valuable football clubs.

The first mainstream effect of ‘financial-doping’ in football (Also see women 2019 football world cup), however, was witnessed in 2003 when Chelsea Football Club was purchased by Russian billionaire Roman Abramovich. Before this investment, the club had only seen limited success. Following the purchase by Abramovich, the club saw heavy investment and have since gone on to win eighteen honours.

The effect of money on football and the unfair advantage it provides clubs who have wealthy owners is thus, not a new debate. And with the advent of rich owners, an adverse effect has been seen in the football market through steep wages for players and transfer inflation. To protect against this, and stop rich owners from effectively ‘buying trophies’, UEFA introduced Financial Fair Play (FFP).

FFP is a term that has been in football news and discussions for a while, but confusing to understand for a football fan who only wants to focus on watching their team play football.

Recently, Der Speigel, a German news outlet released documents stating clubs like PSG and Manchester City were breaching its rules in an effort to spend more money and be more successful. However, FFP is not a new phenomenon. It was implemented in 2011 and since then, UEFA has penalised many teams which they believe were breaking FPP rules. The latest of its investigation includes Manchester City.

Under FFP, clubs are supposed to ‘break-even’, meaning they can only spend as much as they earn. Clubs are also expected to be transparent about their revenues and their accounts are assessed over a rolling three-year period.

Under FFP regulations, ‘breaking-even’ means clubs need to balance their football-related expenditure, which includes transfers and wages, with income they receive from tickets and television, and sponsorship deals. Money which clubs spend on stadiums, training facilities, youth development or community projects is exempted from FPP. The regulations are policed by the Club Financial Control Body (CFCB) which is set up by UEFA.

When announcing the new legislation, former UEFA president Michel Platini said “Fifty percent of clubs are losing money and this is an increasing trend. We needed to stop this downward spiral. They have spent more than they have earned in the past and haven’t paid their debts. We don’t want to kill or hurt the clubs; on the contrary, we want to help them in the market.”

FFP rules were established to prevent clubs from spending more than their means in an effort to be successful and thus facing financial trouble later. This is especially for rich owners of clubs who are prevented from investing their own billions into the club, unless the club can earn money.

This becomes a challenge clubs like Manchester City and Paris Saint Germain, who while are successful locally, cannot match up to the global brand of clubs like Manchester United and Real Madrid. While Manchester City and PSG have the richest owners, Forbes’ magazine ranks Manchester City as the 5th most valuable club. PSG is the 11th most valuable club (ranking as of 12 June 2018). The clubs rank 5th and 6th respectively on Deloitte’s Football Money league which assesses the revenue clubs generate from football operations.

So if clubs are expected to be transparent about their revenue streams, how are certain clubs accused of breaking FFP rules? As part of Football Leaks (the sport’s version of WikiLeaks), Manchester City were alleged to have duped UEFA by finding a way around the rules. The reports said the club overvalued sponsorship deals to try and avoid the restrictions. This is the latest allegation of FFP breach against the Abu Dhabi owned club. In 2014, they were fined a €49 million euro  fine and restrictions on transfers and European squad. The squad restrictions meant the club could only name a 21-man European squad rather than the usual 25. City, PSG and, 7 other clubs were given penalties in 2014 – these were the first wave of FFP sanctions.

Clubs like City and PSG, whose owners have other businesses and companies, have tried to inject money into the club through sponsorship deals with said companies. When this is done, UEFA will once again investigate to make sure the sponsorship deals are of ‘fair value’. The latest Football Leaks allege City owners overvalued sponsorship deals from related companies.

There are different sanctions that a club can face if they are found to have breached the FPP rules, the worst of which is being banned from European competition. Depending on various factors, sanctions can include warning, fines, deduction of points, disqualification from competitions in progress, exclusion from future competitions or even withdrawal of a title or award (even though that’s the most unlikely).

This does not mean clubs are not allowed to have losses anymore. Clubs can spend upto 5m euros more than what they have earned, per assessment period. Under the last monitoring period, total losses of 45m euros were allowed as long as club owners could cover such amounts. Assessments, as stated before, are made over a rolling three-year period.

“Buying the league” is a taunt that has been used against Manchester City and Chelsea over the years. In the same vein, PSG is ridiculed for spending millions and still failing to win Europe’s coveted trophy: the Champions League. As football gets more competitive with clubs being bought by billionaires, players expecting higher salaries and the ridiculous amount of transfer fees, FFP’s implementation and the role of UEFA continues to become more important – it is only through financial regulation will we be able to witness the soul of the beautiful game.