You can find parts one, two and three here. I’ve subgrouped them under the Financial Fair Play category for convenience.
Objection 5: All this debate over the merits and drawbacks of Financial Fair Play is pointless anyway. Jean-Louis Dupont, the lawyer who took the Bosman case and successfully altered football contract law in 1995, has challenged FFP to the European Commission. Financial Fair Play is dead in the water because it’s anti-competitive. It’s only a matter of time.
Okay, before we dive headlong into this, here’s Pratt Promise Number 1: I AM NOT A LAWYER. This means several things. First, I will have to defer to actual lawyers with experience in sports lawy in speaking on this issue along legal grounds. Second, I am forced to make my arguments not in the spirit of EU trade law, but in the spirit of Dupont’s specific economic objections to FFP which are in part detailed in a recent op-ed for the Wall Street Journal.
I will start by saying that questions over the legality of FFP are, in my opinion, the most cogent argument to date against Financial Fair Play. It’s also by far the most negative. It simply asserts that FFP is anti-competitive and therefore against EU law. It has nothing to say on the continued viability of the status quo, or whether there is, in fact, a problem at all with regard to financial security in European soccer. All it says is UEFA’s proposed solution isn’t legal.
This is important because many opponents of FFP (including Dupont) use this objection as one of several arrows in their quiver. The problem is some of those other arrows include arguments like, “If UEFA really cared about financial sustainability, they would have also addressed debt and LBOs”, and “If UEFA really wanted a level playing field, they could have instituted luxury taxes on revenue rich teams or hard salary caps,” as if the spirit of Dupont’s legal challenge to FFP wouldn’t capture these ostensibly collusive measures as well. This is particularly odd as Dupont himself offers them up at the end of his WSJ op-ed without a hint of irony (more on that later)!
You can’t have your cake and eat it too. If you believe Dupont’s legal challenge is unassailable—FFP is anticompetitive and restricts player movement—then you are in favour of the status quo.
So what specifically are Dupont’s grounds in challenging FFP? I’m going to mostly make reference to his WSJ article, although it these apply as well to the specific legal grounds outlined in the press release on the challenge.
First, he notes that while the European Commission has spoken out in support of UEFA’s break-even measures, this would not be the first instance in which the EC spoke in favour of regulation that was later struck down by the European Court of Justice. Dupont writes:
In the 1995 Bosman ruling, the ECJ ruled against restrictions that prevented football players from moving to new clubs after their contracts expired. The Luxembourg-based court also prohibited domestic football leagues and UEFA from placing quotas on the number of non-EU players allowed on teams.
This seems sensible enough; the EC’s seal of approval may not mean much once the case comes in front of the ECJ. That’s why there are higher courts.
Second, Dupont makes reference to the fact that, following the 2006 ECJ ruling in the Meca-Medina case, “…sports do not constitute a special case before EU law. The court must apply the same tests to sports as it does to any area of economic activity.” Dupont was involved in this case. If you hate FFP you may already be smiling, but you should be aware of current UEFA general secretary Gianni Infantino’s initial objections to the Meca-Medina ruling which includes some fairly dire implications for European sport:
Nevertheless, it is not difficult to see how the position adopted by the Court may still open up a “Pandora’s box” of potential legal problems. For a start, almost any sports disciplinary measure for any offence (e.g. doping, match-fixing, gambling, bad conduct, etc) might be described as representing a condition “for engaging in” sporting activity (in the sense that such measures may restrict somebody from “working”). Thus, all disciplinary measures (especially those imposing significant penalties) could, it seems, now be susceptible to challenge under EU competition law. It may also be assumed that the view taken by the Court applies to the position of clubs as well as players. There are a myriad of sports rules and regulations concerning the eligibility of clubs to participate (“engage in”) sporting competition. Should all of them be subject to review under EU law? The judgment of the ECJ seems to indicate that the answer is yes, even though it seems difficult to imagine the ECJ would have wished for such a result.
In other words, the EJC may have backed themselves into a corner that Dupont will attempt to exploit in his attempt to quash FFP, one that could allow challenges to everything from disciplinary measures for match-fixing to all the eligibility rules for a club to play in a league. For those who believe stridently that sport is as business and should be regulated as such, here is your cake that you’re gonna have to eat too.
From here we get into the meat-and-potatoes of Dupont’s legal challenge to FFP:
The relevant test for sporting rules, therefore, is that if they distort competition or other EU freedoms, they must do so no more than is necessary in pursuit of legitimate objectives. That FFP distorts competition and EU freedoms is plain: EU case law has held that football players are the raw materials for football clubs to produce their final product. FFP is a joint agreement between clubs to limit their freedom to hire players by restraining their ability to spend on wages and transfers. This restraint of free competition may at the same time constitute a violation of the free movement of workers.
The next question is whether the objectives of FFP are legitimate and necessary. UEFA has put forth several objectives for FFP, the first of which is preserving the long-term financial stability of European football. This is laudable but unlikely to be considered such a fundamental objective that it justifies restricting competition.
Beautiful in its simplicity. Players are “raw material for football clubs to produce their final product.” Which is what exactly? Points in the table? Trophies? Better global brand recognition? Shirt sales (wouldn’t that be overseas garment workers?)? But I digress.
FFP, by enforcing a break-even restriction, prevents clubs from spending what they want to hire and keep players and therefore restricts their free movement. Dupont then asserts that the goal of FFP doesn’t justify limiting competition.*
On the point of “limiting player movement,” it’s hard not to see how the financial status quo doesn’t achieve this already in European football. Permitting clubs to spend well in excess of turnover on the back of owner equity arguably inflates both wages and transfer fees. This inflation restricts clubs without access to generous revenues or limitless equity from spending judiciously in the transfer market. Players are increasingly left with limited options as clubs cannot afford to pay ever increasing fees and wages and so seek out alternatives (player development in academies, overseas prospects). Moreover, clubs that decide to spend wildly in excess of turnover to compete come-what-may face crippling debt, and, increasingly, the threat of administration. This further limits employment opportunities for players.
I’m not sure how this works as a legal argument, but one of the most important, if not the most important, aims of FFP is to bring down wage and transfer fee inflation, something Dupont does not address in his op-ed or in his legal challenge, except to say that clubs would be forced to offer players (and agents, by extension) lower wages and fees.
In response to this, Dupont could argue that revenue-rich clubs like Bayern Munich and Manchester United can still spend what they want on the best players, ending any hopes of bringing down wages and transfer fees. To which I would counter by bringing up the notion of scarcity. There are only so many clubs, and far more talented players than can be employed at the highest wages. This both would limit any inflationary effect of big spenders, in addition to offering more employment opportunities among clubs now able to afford their services with break-even provisions.
All of this is basically moot anyway as most PL clubs, for example, either already qualify for UEFA’s provisions or would require very little financial adjustment to do so.
From here, Dupont offers the standard FFP-as-anti-competitive-power-grab argument:
European club football is characterized by numerous competitive imbalances: between clubs competing in UEFA competitions, between the domestic leagues of different countries, and between individual clubs in those leagues. Often the key determinant of a club’s financial strength is the size of its domestic market and the commercial realities that apply within it—competing in the English Premier League will always be more lucrative than in its Scottish counterpart. As a result, the leading clubs of smaller countries such as Luxembourg or Ireland will always be at a disadvantage next to the leading clubs of bigger markets.
The break-even rule makes no allowance for the commercial disparities between individual national leagues, which means smaller clubs are hit harder, proportionately, than larger ones. Without the ability to invest in their longer-term success, smaller clubs will stay small. This is clearly anticompetitive.
Again, the circumstances addressed in the first paragraph already exist now. Moreover, clubs can invest in their longer-term success under FFP; Dupont seems to forget that stadium improvements, academy spending and other non-player-related expenditures are exempted from FFP’s break-even provisions. Yes—the break-even provision doesn’t level the playing field in terms of already existing imbalances in team revenues, but it also doesn’t prevent clubs from seeking alternate means to acquire talent and build a winning team other than simply dumping money into the transfer market. Dupont for that matter also doesn’t address the inherent risks already associated with gambling on market talent this way.
Dupont mentions market proportionality (Luxembourg isn’t as big as England) and the onus on UEFA to take on “the least restrictive means of achieving its aims” by accounting for these differences. Again, I’m not a lawyer, but this seems like sturdier ground for a challenge to the provisions. After this comes a paragraph that is truly, truly puzzling considering all that came before:
None of this implies, however, that competition law prevents UEFA from improving football’s financial model. If UEFA is serious about tackling the issue, it should address the root causes of the competitive imbalances among teams. UEFA’s territorial model could be redrawn, for instance, to allow clubs from major cities but small countries to become more competitive. More ambitious revenue-sharing between clubs and/or whole leagues, partly financed by a “luxury tax” on high-spending clubs, would also help.
This is an odd conclusion to say the least, particularly considering the frequency with which “luxury tax” and “anti-trust suit” have been mentioned in the United States, and the opposition in some players’ unions to luxury taxes in their sport. How is punishing clubs that earn more revenue via a luxury tax any less restrictive of competition than FFP? Especially insofar as it comes to not restricting player movement? Maybe a lawyer can sort me out on this count.
In the end, as sports lawyer Daniel Geey has pointed out, the challenge is likely going to take a long time to come to fruition one way or the other:
Whilst an initial EC Decision to reject a complaint or open formal proceedings may occur within a year, the subsequent appeal steps will take much longer. If the EC believes there are anti-competitive features inherent in the FFP rules (and the Commitment route is not used), formal proceedings may be opened. Alternatively, a EC rejection of Striani’s complaint will likely be appealed to the General Court which may mean 3-5 years before a definitive conclusion.
That means by the time a ruling comes down, we’ll already have a good sense of the dystopian horror wrought by FFP.
*In fact, it’s not strictly preventing clubs from hiring or keeping players at all. UEFA’s break-even requirements are mandatory for entry into its competitions. I would assume this doesn’t matter if we’re talking about preventing access to a particular market, however, do Dupont’s point stands.