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Financial Fair Play
Jean0987654321 (Manchester United) 2 years ago
Man see and PSG will still throw oil Arab money on players with this shiet  If anything, it makes mid table teams weaker!
HangTime (Chelsea) 2 years ago
Like
Fynkymonster (Arsenal) 2 years ago
It will be interesting to see how UEFA deals with "creative accounting". For those that are unfamiliar with the term it can mean one part of the business lending money to the other part of the business at an inflated rate to drive the profit down and pay less tax. Glaxo Smith Kline (GSK) has its Europe HQ in London where they should pay 22% tax on its profits. But GSK in Switzerland lends money to London for an inflated APR driving the profit down in UK, and increasing them in Switzerland, but in Switzerland they only pay 3% tax on profit. Technically this is legal in the eyes of the law. Clubs can flip this on its head. Man UTD for example, can set up a corporation in Hong Kong which buys shirts and merchandise from UK for an inflated price, driving the profits up. Hong Kong then operates at a loss because of the high prices they paid for the shirts and then is forced to "borrow" money from UK at inflated rate of interst. Also that corporation could buy a player, pay his wages but "loan" him to Man United for a season or two. Governments all across the world have huge dedicated departments (Inland Revenue, HMRC in the UK) who have massive budgets and manpower (which UEFA can only dream of) but can't catch up to big corporations. So how is UEFA going to compete with that? If Man City had added another layer to the sponsorship of Etihad, ie have the money come from a private company, which unlike a publicly traded company doesn't have to name its owners or directors and profits and losses, all of us would be none the wiser. We would "know" what happened but it can't be proved. Since all of this is legal in the EU law which UEFA can't change it really will be interesting to see what happens
ScouserDan (Liverpool) 2 years ago
Great post, very well explained for people who do not know much about Financial Fair Play
CarlCon (DC United) 2 years ago
Thank you very much. Appreciate it
CarlCon (DC United) 2 years ago
For those unfamiliar with the term, Financial Fair Play (FFP) is the regulation UEFA first agreed to bring into play in 2009, when it was announced that new rules would come in “to prevent professional football clubs spending more than they earn in the pursuit of success and in so doing getting into financial problems which might threaten their long term survival”. It is also committed to protecting players, ensuring their contracts remain adhered to.

UEFA President Michel Platini has expressed worry over the current situation amongst European clubs, where up to 50% of clubs are in a position where they are losing money each year. In 2009, UEFA reported that more than half of the 655 registered clubs were running at a loss, and 20% of those were said to be in “financial peril”. Along with saving teams from ending up with too much debt, the intention is to also monitor interactions between clubs and billionaire owners, preventing outside sources from funding excess purchases and creating unstable environments or unfair advantages.

Every club participating in the Europa League or Champions League now must begin to abide by these new rules, and have until 2014 to balance their football-related expenditure. In simple terms, FFP limits the number of year-on-year losses a club can sustain. Club finances will be examined on a three-year basis, allowing for occasional “spike” years where a club may suffer high losses one season but have two others to make up for it.

Under these new rules, owners can only contribute a maximum of $55.5 million from 2013-2015 seasons together, and $37 million from 2015-2018.

“Sugar Daddy” funded clubs like Manchester City, Chelsea, and Paris Saint-Germain with outrageous quantities of unearned money being pumped into them will always come to mind when considering who these regulations have been made for, but it would be a huge disservice to FFP to suggest these were the only targets.

Cast your mind back to the 2009/2010 season when Portsmouth, a team in the English Premier League, the most profitable league on the world, had debts of almost £140 million, and fell into administration after being unable to pay wages or restructure debts caused by mismanagement of the club’s finances.

Or in Italy’s Serie A, despite winning five league titles in a row, Internazionale accumulated a loss of €1.15 billion in the space of 16 years with owner Massimo Moratti himself pumping €730 million of his own money into the club to help cover the debt.

And even Spanish giants Real Madrid were racking up tremendous debts during this time, raising their net debt to €330m with the signings of Ronaldo, Benzema, Alonso, and Kaka, to name but a few of their many big-money deals. Their president actually had two friends of his (who were presidents of banks) loan the club money to help keep them in shape.

These were the kind of issues Platini had in mind when pushing FFP, and UEFA’s plans are to ultimately develop a structure that prevents clubs like Portsmouth from falling into the abyss, along with keeping clubs from unfairly gathering outside money and buying success without earning it. Officially, UEFA offer no stance on trying to stop these clubs gaining an unearned advantage, but instead claim they are acting in fear of what may happen if one of these owners decide they no longer want to own their club and leave the club in a terminal state when the bottomless pit of money disappears without warning.

In regards to the “Sugar Daddy” clubs like PSG and Manchester City, UEFA have declared FFP will help reduce the wage and transfer inflation that they claim has been caused by these clubs spending never before seen amounts of money, along with ending the mentality that they “must” pay so much to remain competitive.

Another issue UEFA would like to tackle is a practice known as a “leveraged buyout”. Examples of this can been seen at both Manchester United and Liverpool, where their respective owners loaded debts onto the clubs while they borrowed money to pay for them, using the club’s profits to pay off the interest. This financial tactic is said to have cost United up to £500 million which could have been spent on the club itself. Liverpool’s ex-owners didn’t deal in so much debt, but did enough damage to have the Royal Bank of Scotland threaten to demand Liverpool pay these debts up front, which would have brought the club to bankruptcy.

However, leveraged buyouts are permitted under stock market rulings, so FFP in its current form is unable to prevent them from occurring. Saying that, any club that “suffers” from such a situation will still rack up debt in the eyes of FFP, which can be considered a breach of these UEFA rules and therefore result in punishments from UEFA.

How UEFA deal with these leveraged buyouts will no doubt come under severe scrutiny in the not-so-distant future, since it appears to be one of the more complicated problems that they face.

Some of these punishments threatened by UEFA for violators of FFP rulings include having points docked in UEFA tournaments, fines, withholding prize money, and even disqualification from tournaments.

They have already withheld prize money from 23 clubs who have failed to pay debts this season. These debts include tax bills and money owed to other clubs. Some of the clubs involved include big names like Atlético Madrid, Sporting Lisbon, Fenerbahce and Málaga. UEFA have given these clubs until October 15th to explain to them how they plan on paying their debts, with further punishment possible should any clubs fail to do so.

AEK Athens of Greece, Gyor of Hungary, and Besiktas of Turkey have already been excluded from this season’s Europa League as a result of mismanagement of debt.

Criticism

FFP is not without its critics. Many fear smaller teams may suffer as a result of only being able to spend what they make. Questions about how this will affect the growth of smaller clubs are most prominent amongst those who object to the new rulings.

With this fear that smaller clubs may not have opportunity to grow, some worry that the monopoly held by Europe’s big name clubs will worsen.

Furthermore, there is a worry that clubs already being funded in ways that will be “Illegal” when FFP fully kicks in will simply find new ways to move their money around in an attempt to take advantage of loopholes. This has recently been highlighted with Manchester City’s £400 million deal with Etihad, where the Council of Europe's Committee on Culture, Science, Education and Media have released a report that called such a deal “improper” and a “circumvention of the rules”.

“Etihad belongs to the Abu Dhabi royal family, and the Abu Dhabi United Group, which is led by Suleiman Al-Fahim, owns Manchester City” according to the report. This kind of “club sponsoring itself” workaround of the rules is deemed to be morally unacceptable, and is currently under investigation by UEFA.

This behaviour from Man City even led to Borussia Dortmund’s chief executive recently suggesting that City should be thrown out of the Champions League.

Another criticism highlights how each country has different tax rates, which basically means one club may have to spend €100,000 per week to give a player a certain wage, where another club would only have to spend €80,000 to provide the same income for that player. This leads to an unfair imbalance when FFP measures up total costs.

English clubs have shown concern for a number of reasons. They fund several charities and pay “parachute payments” to relegated clubs, where they spend roughly £170 million per season which will not be excluded from their total losses when measured by FFP. This is a burden that many other teams from other leagues (primarily the other “big” leagues in Spain, Italy, and Germany) do not have to worry about, which again will result in an imbalance if UEFA don’t figure out a way to take these payments into account. While these payments may not have too much of an impact on the bigger English clubs, they can be a real crutch for smaller teams trying to compete.

Another fear coming from English camps is how other countries allow “third party ownership” of players, where investors can own a percentage of a player and ease the cost for their new clubs. This act is banned in the Premier League, so again there is an imbalance of how FFP affects English clubs.

UEFA’s lack of clarity in regards to how clubs will be punished is another cause of concern. Their current rules state how sanctions “can include” fines, or “may result” in other things. This uncertain language is something UEFA need to fix in order to make it very clear exactly what punishments face clubs who break certain FFP rules.

UEFA have promised to address each and every concern over the coming years and strive to produce a truly fair system that works across all of Europe.

How will FFP be viewed in 10 or 20 years time is anyone’s guess, and we can only watch with interest as UEFA tries to lock-down on overspending and bad business.



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