In this article , we will delve deep into the effect of heavy spending in the European football market and more importantly, critically analyse the workings of the apex financial body which regulates the spending of the clubs (financial fair play regulation) and the controversy surrounding it.
Introduction
In order to fully understand the workings of the Financial Fair play Regulation,it is only fitting to begin with, the current inflationary situation occurring in football with the best example being the European football market.
Europe is the biggest transfer market in football , thanks to being home to the best and the most competitive leagues in the world. Every kid dreams of one day playing for the likes of Real Madrid, Barcelona, Manchester United or Bayern Munich. However,unless your club is bankrolled by Oligarch's, chances are that the current hot prospect on the market will not be playing for your club.
It has been widely reported that the football industry is currently experiencing an early form of hyper-inflation known as "demand-pull inflation". This situation occurs when there is an increase in the supply of money while the supply of good stays consistent or depreciates .in lay man's terms, the increase in available transfer funds has not been matched by a growth in the number of consistently good players. Another unique example to understand this, Robert Mugabe's government in Zimbabwe. His government starting printing their own money such that at one point, a single loaf of bread cost millions of Zimbabwean dollars. Although it would be deceitful to compare the football industry to Mugabe's regime or a football player to a loaf of bread, the end result is not far apart -highly inflated prices.
Real Madrid had recently signed upcoming Serbian star Luka Jovic for a whopping 52 million pounds. He certainly has potential, but spending that much money for a person who may leave after spending a mere single season with the club seems ludicrous. To put things into perspective the legendary Diego Maradona was bought for 15.2 million pounds by Napoli and fast forward to mid-2017, this amount looked like peanuts compared to the 265 million dollar price tag placed by Barcelona to avail the services of Brazilian superstar Neymar Jr. The funny fact is not the insane valuation, rather its that clubs (PSG in this case ) were willing to match that offer.
This ridiculous spending spree had created an imbalance across leagues and therefore The Financial Fair Play Regulatory body was established for this purpose.
History and Workings
In September 2009, a financial regulatory body was agreed in principle by the financial control panel of football's governing body in Europe, UEFA. This body soon came to be known as 'UEFA Football Financial Regulations' or FFP.
This body has been established to prevent clubs from spending more than they earn to gain success and also preventing 'financial doping' by injecting money and making leagues one-sided.
The regulation, in theory, enforces sanctions on clubs who exceed spending limits over multiple seasons thereby essentially capping the amount that a club spends such that it is almost equal to their relevant income and within a specific framework. other penalties include: withholding of prize money, player transfer bans, and the severest one being disqualification from European competitions.
However, this ' budget cap' has resulted in 2 major implications:
The cap is uneven among competitors in the sense that clubs with higher relevant income are allowed to spend more than clubs with lower relevant income. Here, the FFP has not shown flexibility within its framework.
The definition of relevant income excludes certain sources of financing namely people known as benefactors(notoriously known as the sugar daddies of the football industry) who inject money into the club. These injections don't get tallied into the final expenses and therefore puts less influential clubs at a highly disadvantageous position
The above graph is based on a study conducted by Duke University showing that few clubs from this graph have started abiding by the rules and thus providing a glimmer of hope towards a fairer, less inflated transfer market by regulating their spending to earning ratios.
Controversies surrounding the FFP
This rule however, carries its fair share of controversies, the rationale behind the FFP is to ensure clubs do not spend beyond their means, but some clubs have discovered ways to undercut the spirit of FFP while technically remaining within the regulatory guidelines.
According to article 58 of the FFP regulation, relevant incomes ,and expenses from related parties must be assessed at fair market value. Now the issue with related party income, specifically when it comes from sponsorship 's, is it can be difficult to discern what part, if any, of the revenue is truly intended to be sponsorship payment and what portion is equity contributions to the football club directly. There have been instances where a constitutional monarchy and its subsidiaries have owned and become lead sponsor's of a club. This has resulted in these clubs circumventing regulations by using the sponsorship agreement as a facade and thereby facilitating a way for rich benefactors to inject money into the club.
What's alarming is not UEFA's inability to punish clubs for their unfair actions, rather the ability of clubs to bully administrators into submission by ensuring they receive smaller penalties for breaking rules. Accused clubs may claim that they are merely proposing reforms, but for most football fans, the furor has reinforced the impression that the rich are strong-arming the rest and that the Financial Fair play (FFP) regulations which UEFA created to encourage growth and competitive balance is useless.
There have been nasty debates about clubs "buying titles" or "buying wins" and these hurling accusations of such nefarious deeds only goes to show that there is a dark underbelly in the football industry.
Conclusion
Can we come to an agreement that Financial Fair Play regulations are just a farce?- no, not exactly, but we do believe that there is a glimmer of hope for fairer regulations that embody the ideals of :
"THE BEAUTIFUL GAME "
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