Uefa Financial Fairplay Regulations and European Union Antitrust Law Complications

• Jurisdiction: European Union
• Citation: Vol. 29 No. 4
• Publication year: 2015
• topic: Antitrust and Competition,Business of Law

UEFA Financial Fairplay Regulations and European Union Antitrust Law Complications

Valerie Kaplan

UEFA FINANCIAL FAIRPLAY REGULATIONS AND EUROPEAN UNION ANTITRUST LAW COMPLICATIONS

Introduction

European Football¹ is not just a sport to the rest of the world. Each match is more than just a game. A match can and has represented old battles that never die completely. The Celtic-Rangers rivalry is more than a cross-town rivalry, but a representation of the unfinished political fight over the Protestant Reformation.² The Barcelona-Real Madrid rivalry represents a long-running nationalist fight between Castilian and Catalonian Spaniards.³ Celtic's long running rivalry with Rangers Football Club (FC) is just another part of the centuries-old rivalry between Northern Irish Catholics and Protestants.⁴

While one's club is a representation of his or her nation and tribe, it is also a business, as shown by the globalization of the sport.⁵ And just like any business, occasionally there are financial issues. Just look at Rangers FC, where mismanagement and overspending forced the club to go into administration and then liquidate in 2012.⁶ To keep up with its traditional rivals, Glasgow Celtic, the Rangers have consistently spent more on players

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than the club could afford on its payroll.⁷ Between 1999 and 2010, the club lost an average of £13 million per season.⁸ Rangers sustained these considerable losses by counting on qualifying for UEFA Champions League each year.⁹ However, an upset in the 2008/2009 season caused the club to lose a £10 million payout, since the Rangers would not receive the financial benefits of competing in the Champions League.¹⁰ To further compound its financial issues, the club management's ill-advised scheme to reduce the club's tax liability unraveled, and Britain demanded £21.4 million in back taxes.¹¹ This was enough to push the Rangers into insolvency. The club entered administration, resulting in liquidation.¹² Rangers FC's business and assets were sold to a new company and the Rangers in the 2012/2013 season were no longer one of the two premier clubs in Scotland, but instead a club in Scottish League One, the third tier of the Scottish Professional Football League.¹³

Lately, this has not been an unusual story in European football. Valencia Club de Fútbol (CF), a Spanish team, which won La Liga, the Spanish top tier league, and reached the Champions League final twice in the early 2000's, fell into terrible financial trouble, owing €547 million during the 2009/2010 season.¹⁴ Again, this huge debt originated from a mix of bad management decisions and overspending.¹⁵ Valencia CF bought several players who would never play a significant role on the team for an average of €17 million each,

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paid £30 million on severance payments to managers, and began to build a new stadium before selling the grounds of the old stadium.¹⁶

Rangers FC and Valencia CF are not at all atypical. Clubs with financial issues became a common theme in the last decade.¹⁷ By 2011, 63% of clubs in the top tiers had an operating loss in the 2011 Financial Year.¹⁸ Together, these clubs had an operating loss of €388 million.¹⁹ Fifty-Five percent of clubs had an operating loss of €1.675 million.²⁰ Finally, 38% of clubs reported a negative net equity in 2011.²¹

The Union of European Football Associations (UEFA), the administrative body for football, in Europe, observed this problem and approved Financial Fair Play Regulations (FFP) to fix these financial issues.²² FFP intends to introduce rationality and stabilize the financial environment of European Club football.²³ UEFA's objective centered on preventing financial situations similar to Rangers FC and Valencia CF for the "game's well-being."²⁴

As straightforward and valid as the objectives of UEFA were in creating FFP, the structure of FFP makes the regulation illegal under the European Union's competition law. On May 6, 2013, Daniel Striani, an agent, who represents football players, represented by lawyer Jean-Louis Dupont, lodged a complaint with the European Commission against UEFA's FFP regulations, and later lodged a second legal challenge in the Court of First Instance in

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Brussels.²⁵ Although the full FFP regulations will not be implemented until 2015,²⁶ the predicted effect of FFP on the player market and competition between teams clearly violates EU competition law. This Comment will explore the multiple ways that FFP violates EU competition law, and offer a way for UEFA to achieve the objectives of FFP without violating EU competition law.

This Comment is structured in five parts. Part I gives a general overview of how European football is structured, why clubs risk overspending, the Financial Fair Play Regulations, and the lawsuit against UEFA by Mr. Striani. Part II will give a brief overview of the antitrust framework FFP Regulations will be tested against. Part III discusses exactly how FFP violates EU competition law under Article 101 of the Treaty on the Functioning of the European Union (TFEU). Part IV discusses how FFP violates EU competition law under Article 102 of the TFEU. Finally, Part V will suggest alternatives to FFP. This Comment will argue that the FFP Regulations are illegal under both Article 101(1) and Article 102 of the TFEU.

I. General Overview of European Football and the New FFP Regulations

The way football is structured is very different than American sports, therefore this Comment will give a brief background of how European football is structured for context. The way European Football is structured influences the way club owners decide to spend money, and this Comment will explain why. Next, this Comment will explain in depth the Financial Fair Play Regulations, and the lawsuit against UEFA by Mr. Striani.

A. How European Football is Structured

The way FFP affects football is dependent on how football is structured, both its regulatory body and league structure. A quick overview of football's regulatory body and league structure will be given for context to understand how FFP Regulations will affect the clubs and leagues.

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1. Regulatory Body Structure

The structure of football worldwide is strictly hierarchal, from the grassroots level to the elite level.²⁷ UEFA is one of six confederations in the Fédération Internationale de Football Association (FIFA), the international governing body of football.²⁸ UEFA is an administrative body that is responsible for running national and club competitions, and controls the prize money, regulations and media rights to those competitions.²⁹ This body is comprised of each nation's national football association, with a total of fifty-two associations.³⁰

Each nation's football association is comprised of the nation's leagues and regional associations.³¹ Each association is comprised of the nation's clubs, which are in turn formed by individuals.³² This pyramidal structure is also reflected in the regulatory bodies of football, with FIFA at the top, a regional regulatory authority (such as UEFA) in the middle, and each country's Football Association at the bottom.³³ For example, in Great Britain, the top clubs created the Premier League, which is under the regulation of the Football Association (FA), and must submit to its rules and sanctions.³⁴ The FA in turn

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must submit to UEFA's control, which in turn must submit to FIFA's, the ultimate regulatory body, control.³⁵

Through this hierarchal structure, the representative structure is based on the football associations; however, recently clubs have become more involved at the UEFA level through the European Club Association (ECA), and the European Professional Football Leagues.³⁶ Additionally, even though this structure is strictly hierarchical, clubs can choose to break away from UEFA or FIFA; the hierarchical structure of European football is currently governed by a memorandum of understanding that expired in 2014.³⁷ The likelihood of the clubs breaking away was always low, and ultimately they stayed.³⁸

2. League Structure

The structure of the European leagues themselves is unlike anything in American sports. Unlike American sports, a team in the top league is not guaranteed will continue to play in the top league the next season.³⁹ For example, in Great Britain there are four leagues.⁴⁰ At the end of each season, the three teams with the worst record in the Premier League, the top tier in English football, are dropped to the second tier, the Championship League. The top two teams in the Championship League are promoted to the Premier League, with the third spot given to the winner of promotion playoffs between teams in third to sixth place, while the three teams with the worst record in the Championship League are dropped to League One, the third tier.⁴¹

This structure allows clubs who were on the top to sink to the bottom, while teams in lower leagues may rise to the top of the Premier League. For example, historically Leeds United, a strong team finished consistently in the

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top of the Premier League, however, within the past decade Leeds United dropped all the way to League One for several seasons.⁴²

Additionally, depending where a club places in the highest league, the club may be eligible to play in competitions run by UEFA, which are played all across Europe. There are two tournaments: Champions League and Europa League, commonly known as European football. The number of clubs that may participate from each football association in these competitions is determined by a coefficient.⁴³ The coefficient determines which clubs may compete in the more prestigious Champions League or the Europa League.⁴⁴ To compete in these competitions, each club individually needs to be licensed by UEFA.⁴⁵

B. Why Clubs Over-Spend

All clubs wish to compete in the more prestigious Champions League or Europa League. Clubs are very likely to risk overspending to achieve typical sporting prestige, and because...