UEFA Financial Fair Play Regulations – An unlawful barrier for ambitious smaller clubs
17 Jan 2011
All regulations (including those relating to banks and financial institutions) which are based upon prudential principles, have the effect of impeding competition in the market to some extent. However, there would be an outcry if minimum capital requirements for the established major banks were less onerous in practice for them than for others (including newcomers).
UEFA’s Financial Fair Play Regulations (described by UEFA’s General Secretary this week as a de facto salary cap) need to be seen in this light as they do have the effect of favouring those clubs who are already well established. This is because the eventual “break even” rules on footballing activities favours Manchester United over a club like Manchester City which is seeking to buy its way into the top echelon of clubs by recruiting expensive players.
Caps are legally justified and can be enforced by meaningful sanctions (such as exclusion from European tournaments in this case) where the depressive effect on the players’ wages is compensated by achievement of the goal of competitive balance. Thus, for example, fixing the number of players in squads is a good measure (this has been done by UEFA). On the other hand, measures having the effect of allowing the rich clubs to spend more on their squads than other clubs does not serve competitive balance at all. Instead, it reinforces the position of the strong at the expense of the weak and therefore the cap (usually described as “soft”) is not justified and cannot be enforced.
If UEFA wants to clean up football finances without breaking competition rules it needs to impose a “hard” salary cap. A “hard” cap involves applying a ceiling on each clubs’ expenditure on wages. UEFA has not got the nerve to introduce a “hard” cap as it fears breakaway by the major established clubs who will be restive at moves to extend the international calendar and (further down the line) the potential impact of a winter World Cup in 2022. Therefore, while UEFA’s new rules may dampen wages down slightly, they won’t work as intended as expulsion is not an enforceable remedy for breach.