Exemptions for sports such as Football from business competition rules

Football as a business

Football, most notably in Europe, is a hugely lucrative business with the top European Clubs making vast sums of money through such things as ticket sales, sponsorship, television rights and transfers of players.

There are also huge sums of money spent by some of these top clubs generating this revenue, but in other cases smaller clubs without the same amount of revenue, on the purchase of players. In many cases this can lead to those clubs experiencing financial difficulties when they purchase players and do not recoup what they expect to in terms of revenue.

If football is treated as a business in much the same way as any other industry it follows that the competition laws on the European market should thus apply to the football industry also.

Do the competitions laws apply specifically to football?

Currently sport occupies a tenuous position in relation to the law. Often sporting governing bodies will be able to make their own decisions when this simply has an impact upon the sporting nature of the competition. However, when these decisions impact upon the legal rights of the individuals or clubs involved it may be time for the legal world to step in.

The competition laws of the European Union will apply to the business of football when decisions are made that significantly reduce the competition on the European football market. In this context the football industry will be seen as just that, an industry, rather than just a sport.

Which competition laws may be affected by decisions of sporting governing bodies?

A decision made by the European Governing Body of football, UEFA, which may affect the European football market will often come about following an agreement between UEFA and the body representing the top European football clubs – the European Club Association.

In this respect this kind of decision may be seen as an agreement which significantly reduces competition and be contrary to Article 81 of the EC Treaty.

Has this become a reality?

Over the last year UEFA in an agreement with the ECA have put forward proposals to regulate the spending of football clubs and therefore reduce the debt by imposing strict conditions on those clubs wishing to participate in European competition.

These proposals are termed the European Financial Fair Play proposals.

Would any aspects of these proposals fall foul of Article 81 EC?

One of the initial proposals put forward by UEFA was that clubs would only be able to spend a certain percentage of their overall revenue on salaries and transfers.

What was the reason for this proposal?

The reason behind this proposal was that it would increase fair play on the European market as it would stop certain clubs spending vast amounts of money on transfer fees and also wages to temp players to play for them.

For example if a club was just taken over by a wealthy investor this proposal would limit what they can spend on players as it is a percentage of the revenue the club generates that can be spent on players not a percentage of the money the owner brings into the club.

Would this be likely to fall foul of Article 81?

Certain Members of the European Parliament (MEPs) who believe fully in the open market believe that this would adversely affect the competition in the European football market.

How would this be the case?

This is thought to be the case as it any cap on what can be spent would adversely affect the smaller clubs who cannot generate as much revenue as the top clubs which qualify for the top level European competition.

For example if a club qualifies for the Champions League it will generate huge amounts of revenue simply by qualifying. The club will therefore be able to spend a percentage of that revenue on new players. A club who did not qualify for the Champions League would not generate as much revenue and accordingly would not be able to spend as much on new players.

This is viewed as being a significant detriment to competition.

What would be the reasons behind capping the amount spent on transfers in this manner?

The main reason behind capping transfers in this manner would be to prevent clubs spending too much on players and subsequently going out of business. The rate of European football clubs going into administration is on the increase and UEFA is continually looking for ways to reduce this.

Should football be treated as any other business for the purpose of competition law?

The feeling within the European football hierarchy is that due to the unique solidarity shown between European football clubs football should be treated differently to any other business and thus be exempted from competition law.

What is meant by this concept of solidarity?

The concept of solidarity is one that works from the elite level clubs down to the grassroots levels of the game with income from various commercial deals and television rights etc filtering from the top down to the bottom. The thought is that the huge commercial viability of the elite level of the game is used to continue to promote the sport at all levels of the game. This is very different to other purely business markets in Europe.

Is it likely that this transfer cap will be exempted from European Law?

UEFA and the ECA have gone ahead with the Financial Fair play concept which will come into being at the beginning of the 2012/13 European football season. However, currently this simply includes the concept of only clubs that are financially viable are able to compete in European competition.

Within this concept there is no mention of a cap on the amount clubs can spend on transfers and salaries. If UEFA were to try and establish this it may be likely that it will be met with resistance by some MEPs.