Platini announces FFP rules to be 'eased
Posted by Ed Thompson on Monday, May 18, 2015
The announcement that FFP rules are to be 'eased' has left both critics and supporters of the rules wondering what this means for the European football.
The FFP rules and their concept of 'break-even' look set to stay, but crucially, the rule that prevents a wealthy owner from injecting cash into the club to fund losses appears about to be scrapped. In many ways this isn't hugely surprising; UEFA's 'sustainability' argument always looked the most vulnerable in respect of a wealthy benefactor who makes-good any loss made by the club. Although Platini managed to secure approval for FFP from the European Commission, their consent was built firmly on the 'sustainability' platform; the EC has never expressly come out and said it supported the restrictions placed on benefactor owners who didn't run their clubs into debt. The sustainability argument looks decidedly wobbly when the rules are used to punish Man City and PSG's owners who routinely making-good the value of any losses and injecting cash into their debt-free clubs. UEFA would be hard-pressed to argue that Man City and PSG are in a perilous financial state teetering on the edge of oblivion.
It is clear from Platini's comments that UEFA have been unnerved by the legal challenges it has faced and is still facing (in addition from the lack of overt EC support to this element of the rules). In addition to the ongoing Striani/Dupont case, Dynamo Moscow have recently become the first club to refuse an FFP plea-bargain and take their case to the CFCB Adjudicatory Chamber (we don't yet know the reason for their appeal but given Platini's announcement, it seems probable that the club, owned by a bank via one of Russia's most wealthy individuals, is challenging the equity injection rules).
Other than the legal issues, there is another key reason why cash injections from owners will soon be permitted for the break-even test: Man City and PSG (the biggest FFP transgressors) are able to fudge the 'break-even' test. Both City and PSG are State-owned clubs and to get round the FFP rules the now write a large number of inflated deals with state-influenced companies. By maximising income, they can ensure they break even (or come very close). UEFA's Related Party Transaction rules are simply not able to adjust the value downwards for FFP purposes; each of the deals could in isolation be argued to be 'fair value'. Last year Qatar-owned PSG were hit by an FFP sanction for writing a single 250m euro deal with the Qatar Tourist Authority; the club have learnt their lesson and adopted City's model spreading their inflated income round a smaller number of companies.
It is worth remembering why the equity injection rules were originally introduced along-side 'break-even' rules. The FFP rules were voted-in by the European Club Association and the view was that benefactor owners caused wage and transfer-fee escalation. By paying huge fees and wages, clubs such as Chelsea and Man City made it hard for other clubs to keep and acquire players without running up large, potentially unsustainable losses. Although it has taken some time for the effects of FFP to have had an impact, only last week Man Utd's Ed Woodward told press that "FFP is starting to have an effect in terms of controlling player costs". Add this to Infantino's statement that "Aggregate net losses of Europe's clubs have fallen from 1.7bn euros in 2011 to 400m euros in 2014", and we have a picture of FFP clearly helping to move clubs in the right direction.
So how will the changes affect football?
This is clearly good news for most Man City and PSG fans. Those fans who want to see their club purchase the world's finest players (possibly including Messi) will be delighted. Any residual supporters longing nostalgically for the basic charms of the Kippax may find themselves disillusioned but most fans will be delighted at this news; there really is no stopping them. Sam Wallace's (Independent) article from September looks spot-on; "It's no longer a case of whether or not Manchester City can win the Champions League, it is merely a matter of when.."
Both the Premier League and the Championship's FFP rules work on a broadly similar concept to UEFA's (with owner injected equity excluded from Break Even). However, given the increased TV deal and the larger permitted loss in the Premier League, a similar rule change here would not have a huge effect. Although at first glance, Chelsea might look to be a winner from any PL rule change, they would still be constrained by the restriction on increasing the annual wage bill by a maximum of either ã4m a year, or an uplift in commercial income. Interestingly, this wage-rise cap would also restrict clubs like Everton and Southampton from getting to the top-table (even if owner cash injections were permitted for FFP purposes and if they had an owner willing to roll the dice). Quite what the Liverpool owners would think of a potential PL change would be interesting; they cited FFP as one of the reasons they bought club. A rule change in the Premier League would make it a real struggle to get as close to Man City as they did last season.
If the winners from a UEFA/PL/Championship rule-change would clear, it less easy to identify who would lose from any change. We may well see wage escalation take-off again and see more European clubs get into difficulty. Perhaps it is in the Championship that things might change the most. In the short term, QPR will be heartened by Platini's announcement (in advance of their arbitration hearing). Longer term, any lifting of the restriction in owner-injected cash might require the introduction of wage-rise caps (or interactive, real-time monitoring) to avoid a desperate spending battle to get out of the division.
Before critics prematurely rush to celebrate FFP's demise, is worth noting that it is now over two years since any Football League or Premier League club went into administration. That just might have something to do with FFP.
