Short Background Paper The Union of European Football Associations Topic Area: UEFA Financial Fair Play The Union of European Football Associations or widely known as UEFA, is a regulating body for football in Europe. Based in Switzerland, UEFA holds an annual meeting before FIFA’s high meeting. Proposing various agenda for the annual meeting, in this case, is about UEFA’s financial system. Reintroduced after the Eurozone crisis, the regulations for UEFA salary cap has brought various debates. For countries with major football that had been hit by crisis, they concerned on how to keep the football going in the most effective way in the time being. Another debate that might spark will be the fact of staggering gap between the rich and poor clubs, in which might affected to the competition fairness in professional football leagues. A. UEFA Financial Fair Play The idea was first agreed in principle in 2009 by the UEFA’s financial control panel. It was brought under the circumstances of European financial crisis, as well as the concern amidst the heavy spending of numbers of professional clubs in Europe. Hoping for the regulations would finally lead to be more level playing fieldby preventing clubs with wealthy owners who make substantial cash gifts to their club, from gaining an unfair advantage over other clubs, who are run on a more sustainable business model, and in so doing encourage lower levels of spending. The FFP Regulations provide for sanctions to be taken against clubs who do not spend within a set budgetary framework over several seasons. As noted in UEFA’s Financial Fair Play Regulations rulebook,UEFA is trying to achieve the financial fair play in which the particular principles are: • to improve the economic and financial capability of the clubs, increasing their transparency and credibility; • to place the necessary importance on the protection of creditors and to ensure that clubs settle their liabilities with players, social/tax authorities and other clubs punctually; • to introduce more discipline and rationality in club football finances; • to encourage clubs to operate on the basis of their own revenues; • to encourage responsible spending for the long-term benefit of football; • to protect the long-term viability and sustainability of European club football. Three simple steps explaining on what the UEFA Financial Fair Play does. First, they monitorclubs financial to ensure that the clubs do not lose more than a specific amount annually. Second, implement a period of monitoring (three years), to avoid single-season one-off events from distorting financial prospects. And the last and surely is, to punish the violators of FFP. This also brings out on what must the clubs do in order to response the FFP regulations. They need to ensure that they don’t make losses of more than €45m per three year period. Except for the first monitoring period which is over two seasons (2011/12 and 2012/13) and this would impact over participation in 2014/15 European competitions. The allowed loss drops to €30m over three years from the 2015/16 season onwards (3rd season of FFP application). However, clubs are only allowed to record this level of loss, if owners are willing to subsidize losses above €5m by injecting equity, otherwise the maximum permitted loss is €5m for the first review period of 2011/12 and 2012/13. So in reality the level of losses accepted by UEFA is much lower than what is being widely reported. Equity injection helps owners, to have a better chance of compliance with FFP. Any expenditure accumulated under developing or building new stadiums will not be recorded under FFP monitoring. Furthermore, any expenses made towards youth development and infrastructure or anything to do with the youth team will not contribute towards expenditure either. So it is considered to be expenditure if the expenses are football-related from transfer fees and salaries. Furthermore, transfer fees would be divided evenly over the term of a player’s contract. And in the terms of income, the assessment will include; ticket sales, TV money, sponsorships, merchandising, player sales and prize money from competitions. UEFA has stated that, “if we see clubs looking for loopholes, we will act”. Still, there are numerous critics and loopholes in regards of UEFA FFP regulations, such as: a) Questions on whether smaller clubs will be able to compete with bigger clubs if clubs can only “spend what they make”; b) Potential for bigger clubs to create artificial income from sponsorships or stadium rights from companies with vested interests from their owners; c) Effect of different tax rates across the countries, that means some clubs will be paying more or less gross than the net figure accounted for; d) Third-party ownership is allowed by UEFA FFP, but out-laws in English Premier League, thus disadvantaging in English sides; Since the implementation of UEFA FFP, it has affected the clubs behaviour in many ways. For example, Italian clubs have, for the first time, negotiated a collective TV rights deal, which gives bigger clubs a smaller share of the cake, in the spirit of creating a more level playing field in Italian football. Also, clubs can no longer afford to lose major players on Bosman transfers, as signalled by Arsenal’s sale of Samir Nasri and Gael Clichy to Manchester City in the summer of 2011. And even the clubs that well-known for its heavy spending, started to curb their enthusiasm in spending. As set in UEFA Procedural rules governing the UEFA Club Financial Control Body rulebook, the violators of FFP regulations will be imposed with several disciplinary measures as follow: • Warning; • Reprimand; • Fine; • Deduction of points; • Withholding of revenues from a UEFA competition; • Prohibition on registering new players in UEFA competitions; • Restriction on the number of players that a club may register for participation in UEFA competitions, including a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of UEFA club competitions; • Disqualification from competitions in progress and/or exclusion from future competitions; • Withdrawal of a title or award. In the 2014 UEFA FFP rulebook, included with two significant rule changes. First, allows clubs to ‘plea bargain’ sanctions imposed to punish them overspending. The second change provides clubs with the right to challenge plea bargains, if they feel they have been negatively affected by the outcome.In early March, it was also announced that only clubs taking part in European competition during the 2013-14 season will be initially assessed for compliance with the break even rule; while the remaining clubs would not be assessed until the following autumn. B. Salary Cap in NBA: A Comparison A comparison of salary cap in other sport is the one that has been implemented by US basketball (NBA). They managed to create a market in which the players are actively pursuing contracts that are less than their market value. In order for their teams to be able to afford other talented individuals, and gives them a chance of winning the NBA title. For example, LeBron James signed his contract with the Lakers with $17.5 million after the salary cap regulated in NBA. Which was considered as underpaid and reportedly the European teams offered LeBron with $50 million a year to play in their league.In which LeBron opted to stay,rather than maximizing his market value. The lesson in NBA’s salary cap is the cap acted as downwards pressure on salaries for elite players. This may risks losing the best players whom rather opted out for maximizing their market value. However, some players are preferred to accept the lower salary in order to increase their chances in their preferred league. C. Proposed Solutions The main proposed solution is to continue with the current UEFA Financial Fair Play Policy up until its full implementation at the season of 2015-2016. The proposed system for salary cap that likely be supported is the soft salary cap system. Where clubs are still allowed to exceed its limits up to 10-20% from its current limits and if they do exceed the cap they would have to pay the exceeding number to their local football association and then money will be distributed equally for another clubs that didn’t exceed its limits. As aforementioned, the similar system can also be found in the NBA system in USA. Another idea is to force each clubs to be able to have its own academy. Where clubs are oblige to use their own players from academy to cut down the spending budget, and also to ensure regeneration of the current team. D. Questions a Resolution Must Answer (QARMAs) 1. In time of crisis, should finally government taking control over football financial regulations in order to balance the government’s financial policy? 2. If yes, to what extent the government shall have the right to meddling into club’s financial? 3. If no, does UEFA have the rights to limit the policies of clubs regarding their spending capacity? And how far should it be? 4. Do the players should have a say in determining UEFA policies? 5. Does money bring better quality to the game, or instead, worsens the quality itself? E. Timeline 1863: Establishment of Football Association in England 1885: Legalization of professional employment in football 1901: Establishment of the first ever salary cap in football by the FA £4 player/week 1920: First review of the salary cap by FA, increased the cap to £9 player/week 1957: Appointment of Jimmy Hill as the Chair of Professional Football Association (PFA) 1961: Threat of strike by the PFA led by Jimmy Hill forced the abolishment of the salary cap in England 1984: Re-establishment of the salary cap in NBA (National Basketball Association) USA 2000: The 1st Los Galacticos Era started as new Real Madrid president Florentino Perez starts buying superstar players starting from Portuguese captain Luis Figo. 2005: Series B in Italy started to implement its salary cap 2008: The economic crisis started with the property burst in USA which was contagious hitting many countries in Europe. 2009: Start of the Los Galacticos Era under the re-elected Florentino Perez by signing two of the most expensive superstar, Cristiano Ronaldo and Kaka. 2009: UEFA agreed on the implementation of Financial Fair Play regulation 2012: Economy of Europe goes even worse, including Spain requesting a bailout response to the ECB as much as 100 Million Euro F. Suggestions for Further Research As far as further research goes, there are a lot of information released on this subject. Many debates are happening since the subject weighing in a lot of pros and cons. For most countries with top European league (e.g. Italy, UK, Spain), the establishment of tighter salary cap, will hamper with their clubs ability to have star players. And this, might lead to fans opted out from the league since the league is no longer attractive, and resulted in profit dwindle. For another bloc, there are confusions about what will they favour. For now the possibility for them, if the regulations applied, to hold for star player. For a start, the UEFA’s official website is actually helpful to search further on financial fair play in UEFA. Another source that relevant is surely the UEFA Club Licensing and Financial Fair Play Regulations Edition 2012, with 93 pages of technical terms and quite detailed information regarding the subject we discussed. Although you may find the rulebook bit of a bore and confusing. And as I have mentioned before, the regulations has started since 2011, so you may want to look out for articles about your country and the clubs stance from 2011-now.
Posted on: Sun, 25 May 2014 18:59:11 +0000
Trending Topics
© 2015