UEFA’s Financial Fair Play rules (FFP rules) require football clubs that have qualified for European football to, briefly put, not spend more money than they bring in, over a reference period of three years, (the break-even requirement). This is UEFA’s attempt to clamp down on debt-laden clubs – whether or not supported by rich uncles or the government – taking prizes from under the noses of clubs with a more sustainable spending pattern. The discussion as to whether the break-even requirement constitutes prohibited restriction of competition has been raging since the introduction of the FFP rules in September 2009. The FFP rules recently made the news once again because the European Court of Justice was forced to dismiss a request for clarification from a Belgian judge on procedural grounds. Although it is a matter of waiting for a definitive (European) judgment, it appears as if at the very least there is a field of tension between the FFP rules and the European competition rules.
Restriction of competition by FFP rules
Among other things, the ban on cartels prohibits decisions (such as the FFP rules) by business associations (such as UEFA) that have the aim or effect of noticeably restricting competition. The break-even requirement restricts the competition between clubs for acquiring the services of players. The effect of this should be that debts will be limited since the growth in the compensation for players (and transfer fees) will be stymied.
On its website, UEFA even acknowledges that the aim of the FFP rules is to limit competition:
“UEFA has a duty to consider the systemic environment of European club football in which individual clubs compete, and in particular the wider inflationary impact of clubs’ spending on salaries and transfer fees.”
Does this mean that a violation of the ban on cartels is therefore established? That is not necessarily the case. Based on established case law, restriction of the competition does not result in violation of the ban on cartels if the restriction is inherent to the legitimate (public) objective of the FFP rules. It is a condition, however, that the restriction of competition may go no further than is necessary to achieve the envisioned goal.
How fair are the FFP rules?
In order to determine whether the FFP rules have a legitimate public objective as defined in the ban on cartels, the question that first arises is to what extent the FFP rules actually contribute to fair football competitions. I think that’s doubtful. After all, it can just as easily be defended that the FFP rules will result in existing relations becoming set in stone: big clubs will stay big because smaller clubs can no longer make extra investments to catch up.
Separate status for sport
In my view, UEFA will mainly have to argue that combatting debt among European clubs is a legitimate objective that cannot be tackled otherwise. In this context, the special status of professional football in European society will most likely have to be invoked. After all, in normal sectors a chronic discrepancy between income and expenditure results in bankruptcies. Football clubs are usually spared such a fate because under pressure from fans, ways are often found (whether or not with the help of state aid) to keep insolvent clubs with a large following from going under.
Europe grants sport a more or less special status. One of the treaty objectives of the European Union is to develop the European dimension of sport, specifically “to promote fairness and openness in sporting competitions and cooperation between bodies responsible for sports; and to protect the physical and moral integrity of sports practitioners, especially the youngest among them.” In light of this, the European Commission seems open to the argument that debt reduction for the sector would itself serve a public interest. In response to questions in the European Parliament about the desirability of European policy to reduce the debt burden of football clubs, the European Commission referred to “self-regulatory measures taken by the football sector to reduce the overall level of debt of clubs”. In a letter to the president of UEFA, the European Commission president (at that time) went even one step further. According to the European Commission, it is “of paramount importance to fully support the objectives of the FFP, recognising the value of robust licensing systems, including cost control mechanisms, to promote good governance in sport”.
Although welcome for the UEFA, the sympathetic attitude from the European Commission is not decisive. Ultimately, the (European) court will have the last word. The fact that the financial stability of the football sector is a legitimate goal is not enough to escape a violation of the ban on cartels. That also requires that it not be possible for UEFA to take less drastic decisions to achieve the same goal, such as allowing professional football clubs to go bankrupt and restart (perhaps keeping their name). Practice has already shown that such a scenario is not always impossible. In 2012, Scottish club Glasgow Rangers went bankrupt and its assets were bought up by an investment company. The restarted Glasgow Rangers did indeed have to start again in the third division because of the bankruptcy, but was able to once again make its way up from there. Football club Parma was still at the highest level in Italy last season but because of a restart after bankruptcy is starting in the fourth level for the coming season.