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Archive for June 9th, 2013

Competition law and sport: we need more, not less ‘financial fair play’ in Europe

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stickerei_fair_playThis time I do not have particularly good excuses for squatting the blog, but I do so nonetheless. This said, thanks to Alfonso and Nicolas!

Basketball fans like myself  are probably following the NBA playoffs. Those basketball fans that are also interested in competition law and in statistics (no doubt a substantially smaller fraction) will have realised that the teams reaching the conference finals this year are based in relatively small metropolitan areas. Only Miami is in the US top ten (9th). Indianapolis (29th), San Antonio (31st) and Memphis (45th) are far behind. Just because there is always a good excuse to point out how incredibly good Kevin Durant is, I will also mention that Oklahoma City is right behind Memphis in the ranking. It is safe to say that the fans of any NBA franchise can realistically hope to see their team win the championship one day.

There was a time where a team based in a comparable European city could aspire to win the UEFA Champions League — Nottingham Forest, which won the European Cup two years in a row (1979 and 1980) is the archetypal example in this sense. Not any longer. Or maybe it could, if a tycoon decided to pour billions of euro into the team overnight. Starting probably with Chelsea FC, we are now used to the stories of teams becoming instant winners. Monaco, just promoted to the top division in France, is the latest (and one of the most outrageous) examples.  In parallel, the Spanish football championship has become unbearably boring. Only Barcelona and Real Madrid can aspire to win. We have witnessed yet another freak show record-beating championship this year.

And yet, the celebrity sports lawyer, Mr Dupont, complains about the modest attempt by the FIFA to introduce ‘financial fair play regulations’. I thought this is a good occasion to point out why more measures actively promoting competitive balance, not less, would be needed in Europe. It has been said thousands of times, but one cannot emphasise enough the fact that competition among sports teams is fundamentally different from competition among firms in most other markets. Teams are interdependent. Without teams against which to compete, clubs are worth nothing (even the Harlem Globetrotters need the Washington Generals!). This means that one big team’s success is only partly attributable to it. In this sense, I have no doubt that Real Madrid and Barcelona are taking a free ride on competing Spanish teams by capturing around 45% of the income coming from the sale of television rights. It also means (and this will look obvious to the readers, but competition authorities tend to ignore this fact when convenient) that fan interest lies in the championship taken as a whole, not the individual teams.

What are the implications of these features? They look obvious to me. There are very good reasons to set a stringent ‘salary cap’ to preserve the competitive balance among teams. Similarly, transfers of star players from relatively poor to relatively wealthy teams should be severely restricted (just as they are in the US). I prefer a championship in which Tottenham Hotspur (to clarify, West Ham is my London team!) can build a winning team around Gareth Bale instead of seeing this player leaving for Manchester City or Real Madrid as soon as he achieves superstar status. Finally, television rights should be more evenly distributed among teams. I believe we will progressively get there, and I hope that, when the moment comes, the Commission will take account of the objective  features of sports competitions (which are measurable differences, not some sort of tailor-made exception) so that European sports become genuinely interesting and the outcomes of competition truly difficult to predict and vary from year to year just as they do in the US.


Written by Alfonso Lamadrid

9 June 2013 at 8:46 pm

Posted in Uncategorized