Manchester City & PSG Expected To Be Hit Hard By FFP

 

“The idea is to get every club over the finish line. Some are already there, others have a long way to go. We understand that, we want to make sure they’re moving towards the finish line.” – Unnamed UEFA Executive

Malaga’s sanction and denial of a UEFA license last year based on unpaid transfer fees appeared to be UEFA’s and Financial Fair Play’s (FFP) first test.  Most waited on the outcome of the appeal process with the Court of Arbitration of Sport (CAS) expecting the sanction to not hold its weight and Malaga to be let back into the Europa League that they legitimately qualified for through La Liga season play.

UEFA, with CAS backing, to it’s credit did not wobble with Malaga, nor did they with Besiktas as the Turkish club challenged a similar license denial and claimed that the sanction was disproportionate.  CAS had this in response:

On the question of proportionality, the panel accepts the position of UEFA, as established by the CAS jurisprudence it cited – just because another sanction could be issued, it does not make the one issued disproportionate. The appellant would have to demonstrate that the appealed decision was ‘grossly disproportionate.”

This all plays into the mounting realization that anyone who might have thought that UEFA’s mechanisms of financial control wouldn’t have any teeth were very mistaken.

FFP has been widey discussed and reported on but if you are looking for a good primer, read Ian Clayden’s, Trevor Birch’s and Daniel Geey’s report and for insight into the current state of affairs, check out Gabriele Marcotti’s Q+A.

Further evidence this week could solidify and certainly dispel any remaining misconceptions about the muscle UEFA brings to the FFP table.

The first thing to understand is that UEFA regulates who competes and does not compete in both Europa and Champions League play via the annual issuance of licenses.  It is within the framework of license application that UEFA has built its FFP guidelines and rules so that they are a requirement of competition.

In a nuttshell (The report and Q+A linked above contain much more detail) FFP rules are that a club must break even in terms of income and expenditure.  Should this requirement not be met, there is an acceptable level of debt allowed which is €45 million total over the previous two seasons which changes to over three seasons after this year.

It has been reported Premier League title challengers Manchester City and French Ligue 1 leaders PSG have been informed that they are in breach of both break-even and acceptable debt limits.  The FFP process continues in the form of a settlement offer to both clubs which involves a reduction in Champions League squad size from 25 players to 21, a wage cap based on the 21 highest paid players of this previous UEFA Champions League (UCL) campaign, as well as a €60 million fine spread over three years.

The biggest issue is that PSG, Manchester City and UEFA have all been quiet in the face of these reports of sanctions and as a result they are technically unsubstantiated. Some varying reports also have potential future prize money from the UCL withheld, as well as a strict limitation on PSG that they only be allowed to sign one player up to €60 million and barring the club from spreading that €60 million over multiple players.

The player signing limitation seems very far-fetched and unlikely especially banning the ability to spread that maximum amount over multiple players.  Regardless of the down-n-dirty details of the settlement offers, the fact is that both clubs, including any others that are in breach would have to respond to the settlement offer.

Both clubs are understood to be negotiating with UEFA over the severity of the limitations and fines but if they fail to come to an agreement, their case is presented before the Adjudictory Chamber of UEFA’s Club Financial Control Body (CFCB) which is seated by actual judges from the European Court of Justice. Their findings and resultant sanctions are final and non-negotiable which means that and protests to the findings only have the CAS as recourse. Keep in mind that CAS now has both a history of upholding strong sanctions from FFP as well as delineating the need for proper explanation regarding “disproportionate” sanctions.

While Manchester City might have seen this coming, it is possible PSG didn’t.  Financially they appeared to have passed the requirements set by UEFA, however their sponsorship deal with Qatari Tourism Authority was investigated.  The QTA sponsorship agreement was worth up to an outrageous €200 million a year for PSG.  Upon further investigation it was found to have exceeded the reasonable market expectation for a comparable deal.  Gabriele Marcotti sums up this process well:

They look at what sort of brand exposure the sponsor would have had if it had spent the same amount on other media like newspapers, TV, the Internet, outdoor advertising or whatever else is available. They look at what other clubs of comparable size in comparable markets (but without related party sponsors) got for similar deals. And they go to marketing companies — folks whose job it is to pair sponsors and clubs — and ask them what they think a sponsorship is worth.”

It’s believed that Manchester City’s deal with Etihad Airways was/is under similar scrutiny.  If the deals are officially found to be overvalued, the clubs will have the difference in valuation subtracted from their balance sheet (not physically taken from them) so as to have an accurate picture of losses.

If reports are accurate, the wage cap and squad restrictions could end up doing the most harm next season since Champions League progress means so much to a club’s bottom line.  Manchester City will receive a significant boost from the Premier League’s new Television deal coming into effect this year as well as the potential for winnings if they win the Premier League but Ligue 1’s TV deal doesn’t exactly match the Premier League’s.

Fines will be the last of the worries of these clubs though,  with Manchester City posting a €181 million loss and PSG’s surely near that level after their QTA sponsorship adjustment, next years sanctions could be worse.  This is getting ahead of current circumstances though, it remains to be seen whether either club, or any other club receiving sanctions will take the settlement.  If any don’t, from there it wont be until June when the Adjudicatory Board meets and it will be August before any CAS tribunal decisions are made.

Reporting on the business side of the world's game.