UEFA’s Financial Fair Play has failed

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Every single person that has watched football before the third millennium can confirm how different it was from today. A new era is upon us, no doubt about it: football clubs slowly evolved into limited companies, players are now assets that enrich entertainment experiences, just like concerts or TV shows. It’s not as simple as it used to be.

First of all, the modern football age requires better management. Simple as that. Better business development, better human resource planning, better long-term vision. Consistently breaking budgets and ignoring financial limitations became so much of a problem, it began corrupting the game from the inside. Besides, it would be too easy (and unfair) to develop a sport in which those who spend more are those who always triumph. Just like in most markets, Authorities and Competition Commissions have to take measures in order to avoid oligarchy. Football fans usually don’t want to see all the power concentrated in just a handful of clubs, while thousands of others battle each other just to get some small crumbs of the cake. We want “David vs Goliath” type stories, drama, excitement, unpredicted results, thrill right until the final whistle!

Focusing on both points (mostly on the first one, I’ll admit), UEFA created Financial Fair Play regulations (FFP) in 2010 and put them into action in the 2011/2012 season. Aiming for more responsible sports management and overall greater financial health in European football, it was designed to reach all football teams that are eligible for UEFA competitions (Champions League, Europa League, etc.) and force them to remain economically coherent. To end the common practice of gigantic spending over earnings and overdue debts – that was the goal of the UEFA Club Financial Control Body (CFCB). A positive step towards a brighter future.

When bans and penalties started firing, clubs were shocked. Beşiktaş JK and Bursaspor KD in 2011; Málaga CF, FK Partizan and two of Bucharest’s clubs (FC Rapid and FC Dinamo) in 2013, among many others. Recently, clubs like FC Porto and Krasnodar have been through restructuring processes under UEFA’s microscope. Curiously, and despite the utmost respect that all of those clubs deserve, none of them fit that monster-fish, top-of-the-world, billions-in-debt type of team that was certainly UEFA’s main target when FFP first came out.

Then, the saga begins. Hyperinflation, ludicrous transfer fees and public statements on “escaping financial regulation rules” like it was a good thing, something to be proud of. As of today, 17 out of the 20 most expensive deals in football’s history have happened after FFP was in effect. Big sponsors are trying to keep up, raising their pay to strengthen the clubs’ financial health, but the future is too unpredictable. These 20 transfers combined account for about 1700 million euro (€). That converts to 1500 million pounds (£) or nearly 2 Billion dollars ($), which is actually bigger than the GDP of 25 countries in the world.

It saddens me to conclude that FFP has failed its purpose.

If we dig deep into discovering the main factors for the mechanism’s struggles, it’s actually fairly easy to identify the holes in the plot. Not so easy, however, to solve them and contradict some people’s relentless pursuit for money and success, regardless of the consequences:

  • Power in the wrong hands – Knowledge is power, and the more you know the rules, the easier it is for you to break them. Nowadays, clubs have very capable and intelligent people in their financial departments – and that’s a good thing – but unfortunately, some put their Economics skills to bad use. In certain cases, not only are clubs sending misguided info to UEFA (disobeying their obligation to provide truthful and helpful reports), but they are also launching lawsuits against UEFA itself, forcing them to back down some of FFP’s rules for being too harsh;

 

  • Too many clauses and exceptions – This problem comes from the fear of being too straightforward with the rules. FFP regulations are complex (reading them was less than entertaining, to be honest) and lots of new “if” and “unless” clauses were added along the way. Although the intention was good, this ended up weakening UEFA’s plans. For example: the initial idea was that clubs had to earn more than they spend, but now they’re allowed a 5 million euro deficit, and in certain cases, a lot more. Another example: the punishment strategy was to suspend the teams’ participation in UEFA competitions, but now, financial fines are more common – if a club is struggling financially, how are hefty fines going to help?

 

  • Hazardous third-party involvement – agents and investment funds are very important players (perhaps “stakeholders” is a more appropriate word) in this new era, and while they always try make deals look like a winwinwin situation, some of the times, they aren’t, and that gives their jobs a bad reputation. Their involvement can end up stalling the players’ careers and damaging the clubs’ balance sheets, deepening their debt. Don’t get me wrong, debt creates value, it is an important part of economic development, but only up to a controllable level;

 

  • Poor follow-up – Every day that goes by, malicious individuals find new ways to go around the system and avoid its rightful rules. Once this is detected, the clauses and exceptions that were mentioned before should be reconsidered. The walls should be closing in on illegal activities, not opening a sprawling field of lawless football. All of this was metaphorical, but you get the point. By now, the cat is out of the bag – there are tons of reports saying that FFP has been strongly lobbied for controversial interventions.

If any devious football moguls are reading this: stop the subterfuge; stop these megalomaniac projects that eventually end up in bigger problems or even bankruptcy, just not in your term. Sensible and sustainable management, that’s all we want.

If anyone from UEFA is reading this: always gravitate your decisions towards your notions of right and fair, not towards the interests of a couple of threatening, seemingly powerful men.

And if any sports managers are reading this, those who are well intentioned but have trouble dealing with regulatory restrictions or financial fragility: Come on, did you skip all of those fascinating Econ classes? Just get back to basics, stick to that break-even rule and you’ll be fine.

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