FIFA Financial Fair Play Rules: Can They Work?
Article By Yinka Aboaba and Amit Singh
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The new Fifa fair play regulations which were implemented last year have been the topic of ongoing debate amongst the football world with some of Europe’s biggest clubs fearing the potential wrath of FIFA if they fail to control their finances. Aimed at improving European football’s long term financial health, as well as increasing long-term investment in youth development and training facilities; the main goal of course is to curb the excessive spending on transfers and wages which have taken place over recent years leading clubs posting unsustainable losses in order to become the most successful sides in the World as a result of often unsustainable expectations from fans. Real Madrid being a perfect example, pressure from fans led to marquee signings of Kaka and the record signing of Christiano Ronaldo.
The regulation will be phased in slowly and will take effect as of the 2012-2013 season over three years initially. The sanctions are extremely serious, with culpable clubs not being given the respected Uefa club licence, which allows them to participate in European competitions.
The approved plan will force clubs which compete in European competitions to try and spend only what they earn. In order to make this new regulation realistic for all clubs, Uefa have allowed clubs to post losses. For the first three years of the campaign (2012-2015), clubs will be set a loss limit of €45 million and this limit will be reduced further to €30 million thereafter. Though these are extremely restricted to what a lot of clubs currently produce, it does show the flexibility of the new scheme.
Of course, with this new regulation, there are ways to get round it. One thing large clubs have tried to do is to spend large amounts of money on youth developments as well as stadium and training improvements. Though there is the risk whether this will allow clubs to produce the ‘next star’, it has allowed them to spend a large of money on certain projects, which do not ultimately get included as part of their expenses by Uefa. Another grey area is in relation to transfers; since player acquisition costs are divided equally across a length of a player’s contract, it allows clubs to not make an immediate heavy loss due to the transfer fee and wages, though this will spread over the contract, leading to clubs making ‘small’ losses over many years. A trend has become clear with most clubs looking to control costs, Chelsea for example barring the huge money signings of Luiz and Torres have recently been quiet in the transfer market releasing Ballack, Deco, Carvalho, Belletti and Joe Cole at the end of the 09/10 campaign in order to drastically reduce the clubs spiraling wage bill. Even Man City the World’s richest club have been quiet thus far only signing Savic and Clichy for modest fees although at least one or two marquee signings will be expected if they are to challenge in the Champions League.
This summer will be the last where clubs will be able to undertake large scale transfer activities without it being included as part of the regulations (though fees will be spread over time as mentioned previously). Already, less than a week into the transfer window, Manchester United have already spent around £50 million on David De Gea, Ashley Young and Phil Jones respectively with more signings expected to follow. Real Madrid have also spent heavily with the recent purchase of Fabio Coentrão for £27 million as well as some other lower budget signings. One can say that there has been more than the usual amount of transfer rumours this summer and football fans should either look forward (or not!) to a lot of player movement either way.
One thing for sure is that Uefa have been extremely clever in implementing this scheme. Whilst aiming to portray that they expect clubs to be self sufficient and that they want to try and put clubs at a level playing field, one can argue that they are doing precisely the opposite. Although the large scale losses by some of the biggest clubs have remained an ongoing problem, the fact that clubs can effectively make constant losses and certain large scale projects do not get included as part of a clubs expenses presents a major grey area. Enforcing the new rules could be incredibly difficult to implement. Man City’s new 300 million pound deal to rename their stadium the Etihad stadium over ten years appears to be a clear violation of the rules but City may well get away with it. Etihad is owned by the owners of Man City and by pledging the large sum from Etihad airlines Gary Cook, City’s Chief Executive feels he has shrewdly side stepped the new regulation. However UEFA should clamp down hard on this if they want the rules to stick and be truly successful, Chelsea and Spurs apparently floated the idea of selling the naming rights of White Hart Lane and Stamford Bridge respectively but reportedly struggled to get even 10 million pounds a year let alone the 30 million that City’s deal is worth. City will have to prove that the sum is the correct fee for such naming rights which it appears is not.
It is logical that having large and well supported clubs excluded from Uefa competition for whatever reason would seriously hinder them commercially; therefore it would not be in their interests to do so. Can one potentially imagine a Champions League season without teams like Real Madrid, Manchester United, AC Milan, Chelsea, Inter and Barcelona? Well I certainly cannot. These are the most supported clubs in Europe and excluding them will shift the large scale interest in European football elsewhere and it would not be difficult for the top teams to create a European Super League an idea thats been touted before by some of Europe’s most elite clubs, however it is unlikely that this will ever come into fruition. What is for sure is FIFA and UEFA need to strike a balance by ensuring fair spending and keeping European football competitive and also making sure fans still get to see top quality football. At the moment the football World order is such that the rich teams are easily able to assert their dominance over smaller sides in a way which stunts competitiveness. Barring Porto’s Champions League victory the Champions League has been consistently dominated by the same sides with small teams like Unirea or Cluj merely making up the numbers. It seems that with the financial muscle of the big sides it is inconceivable to now imagine Steau Bucharest of Red Star Belgrade lifting Europe’s top prize once more.
In England where high transfer fees are rife the new rules may well stimulate competition and mean that rich clubs wont be racking up ‘sustainable’ debt whilst smaller sides become glorified feeder clubs for the big boys, it took City spending over 1 billion pounds to break the monopoly of the ‘big four’ which was the status quo of English football for far too long. Perhaps now, if these rules are properly implemented smaller sides will be able to break into the top 4. By blocking huge money signings it will also mean teams are more reliant on farming young players something that will undoubtedly have a positive effect for the English national team as at the moment young players development is often neglected as bigger name foreign players dominate the positions with youngsters being loaned down the divisons.
Regardless, City’s stadium deal could be the first real test for the Fifa Financial Fair Play Rules, if FIFA allow this deal to go ahead it could well mean the rules are redundant before even being implemented. To be successful the rules will have to stamp out any potential loop holes, but only time will tell if this is the case.
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