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Archive for March 4th, 2010

Competition Law and Sport (II) – Football: State aids and salary caps

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Last Wednesday UEFA published an interesting report which provides thorough and useful information about the financial status of European football clubs. A quick look at the report reveals at least a couple of issues that bear a strong relationship with competition law:

Firstly, UEFA’s report advocates the need for “financial fair play” (in essence: more transparency and financial responsibility) in order to address a problem highlighted in Platini’s foreword: “[t]he many clubs across Europe that continue to operate on a sustainable basis (…) are finding it increasingly hard to coexist and compete with clubs that incur costs and transfer fees beyond their means and report losses year-after-year”.

According to the report, most European football clubs face recurrent losses. The most important leagues, both on the sporting level and economically wise, are the ones with the greater aggregated debt: Premier League Clubs have a net debt of approximately 4000 million euros, followed by Spanish First Division Clubs with a debt of nearly 1000 million.

The inevitable question is: how do clubs operate in spite of such losses? In many instances shareholder’s contributions do the job, but in many other situations clubs subsist thanks to public intervention, which in some cases could qualify as State aid. In the sports sector, as in any other, State aid can appear under multiple guises (e.g. direct subsidization; sponsorship under non-market conditions; non-collection of tax or social security debts; aid for the construction of sports infrastructure; etc). One would expect the European Commission to intervene increasingly more in this sector or, alternatively, to lay down specific rules for the assessment of State aid in the world of sports.

Secondly, the report insists on the fact that the financial perspectives of European clubs presage an even worse future. The report seems to blame the constant increase in player’s salaries, which amount to more than 60% of clubs’ expenses, a proportion that is steadily rising. It is on the basis of this and similar data that UEFA has for some time been proposing to establish a salary cap in European football. The compatibility of a salary cap with EU competition law is unclear. In fact, it was listed as one of the “main pending and undecided issues” in Annex I to the White Paper on Sport: sport and EU competition rules.

All the above seems to confirm something I mentioned on a previous post: the world of sports will be an important and growing source of interesting and complex competition-related issues in the very near future.

Written by Alfonso Lamadrid

4 March 2010 at 8:25 am