UEFA Champions League 2014: After Winning EPL Title, Manchester City Still Faces Potential UEFA 'Financial Fair Play' Sanctions
Nine soccer clubs have been sanctioned by UEFA after failing to comply with the European soccer governing body's "Financial Fair Play" (FFP) rules -- including English Premier League (EPL) champions Manchester City FC, who is appealing the decision, and La Ligue 1 champs Paris Saint-Germain (PSG) of France.
PSG, owned by the Qatar Investment Authority, escaped with a one-off £20 million ($33,686,000 USD) fine while Man City, who is appealing the decision, faces a £49 million ($82,530,700 USD) fine to be paid over three years, a 21-player limit on next season's Champions League tournament roster and a salary cap to the current player payroll.
UEFA deemed Manchester City's €42 million-a-year ($57,792,000.00 USD) sponsorship deal with Etihad as well as PSG's €200 million-a-year ($275,060,000 USD) contract with the Qatar Tourism Authority invalid, causing both teams to fail to meet the FFP rule break-even standard.
The FFP rule was introduced in 2009 and implemented in 2011 for teams that qualify into UEFA's annual club competitions (Champions League and Europa League) so that teams "do not have overdue payables towards other clubs, their players and social/tax authorities throughout the season." UEFA's FFP rule intended for teams to keep the books balanced and prevent team owners from going bankrupt, while leveling the playing field for teams that generate less revenue.
Recently, La Liga's Malaga CF of Spain, who reached the quarterfinals of the 2013 Champions League, was banned from European competition for a season, under FFP rules, after failing to pay their debts.
Ed Thompson, a financial analyst who runs the FinancialFairPlay.co.uk site, believes that Man City's appeal will hinge on technicalities of whether the EPL champions had deficits lower than their wages, triggering a wages write-off that could have helped the club stay out of trouble with UEFA.
Thompson speculates that there may be a difference of opinion regarding 'balancing items', with the European soccer organization claiming that Manchester City paid themselves £22.45million ($37,812,535.00 USD) in fees for a new women's team and two new franchises -- one in Melbourne (having bought out the Melbourne Hearts of the A-League) and one in the United States (purchasing a Major League Soccer (MLS) expansion team New York City FC) -- for sharing their brand name, intellectual property rights and scouting networks.
There may be also be questions surrounding a £24.5million ($41,265,350.00 USD) deal in which the club team sold the image rights to an unnamed company in their latest annual accounts.
"It may be that one of these balancing items was not accepted by UEFA, which had a knock-on effect of not allowing the club to write off the £80million [$134,872,000 USD] wages, which meant that they had then breached FFP to the same scale as Paris St Germain," said Thompson to the Daily Mail.
Thompson also thinks that Man City's decision to hire Deloittes accountants, who helped UEFA draw up the FFP rules, in an attempt to find loopholes in the rules, may have hurt them in the end after UEFA hired rival accounting firm PricewaterhouseCoopers (PWC) to do the audit on the EPL club.
"The rationale was that they should know where the loopholes were within the rules," wrote Thompson on his website FinancialFairPlay.co.uk. "Mindful of this, UEFA brought in rival firm PWC to carry-out their audit of City's accounts. It is interesting to wonder whether inter-firm rivalry contributed in any way to the outcome."
Critics of FFP say that the rule maintains a status quo that allows the rich teams throughout Europe to stay atop while preventing that "more sheikhs and oligarchs blast into the top of European football as Roman Abramovich and Sheikh Mansour did," according to sports-business reporter Ouriel Daskal.
"UEFA president Michel Platini wanted to 'counter financial doping.' However, the main benefactors of FFP are the ones who have more money than others," said Daskal to CNN. "There's regulation on expenditure and external income (from the pockets of the rich) but there's no regulation on income -- media rights, transfer market, prize money and matchday income. So what happens right now is that clubs who have money can take out more money and therefore make more money. This has resulted in growing gaps between the haves and have-nots, which is a lot more disruptive and corrosive than financial doping."
Others point out to the rule's failure to create the promised financial level playing field so that more teams can participate in Champions League and Europa League tournaments. Former chief executive for French club Monaco, Tor-Kristian Karlsen -- who also worked with Bundesliga's Bayer Leverkusen of Germany and Russian Premier League team Zenit St Petersburg -- questions the fairness of the rule for soccer clubs generating less revenue than the top-flight clubs that make regular appearances in the European tournaments.
"It makes it difficult for the smaller teams because to be profitable you have to enjoy success on the pitch," said Karlsen to CNN. "It's a vicious circle. To be more successful you have to spend and if you spend and become successful, you'll bring in more money, more sponsors, attract larger crowds and sell more seats."
Others question whether fines are enough of a punishment for deep-pocketed billionaires and oil sheiks who could afford to eat world-breaking fines considering their vast resources.
"I'm surprised UEFA imposed financial punishments and fines rather than sporting sanctions," said,Thompson to CNN."Fining them, if it doesn't count towards the FFP tests and means that the ruler of Qatar in PSG's case and the ruler of Dubai in City's case, will put their hand in their pocket, put it into the club and that will go to UEFA. I can't see the owners being too upset given their resources. These could be world record sporting fines the like which we've never seen before."
Karlsen believes that transfer embargoes would be a stiffer sanction than fines. EPL's Arsenal FC manager Arsene Wenger was adamant that a punishment such as the one Malaga suffered is the more appropriate response.
"There are rules. You respect them or you don't respect them. If you don't respect them you have to be punished. When UEFA doesn't want to kick the clubs out of the Champions League, they have to find a more subtle punishment," said Wenger. "From all of us on the outside, it looks a complicated punishment, which nobody really understands. We live in a society where everyone is informed. The rules have to be clear that you can inform people well."