Evaluation of UEFA Financial Fair Play Regulations in European Club Football - Case Study Example

Evaluation of UEFA Financial Fair Play Regulations in European club football Introduction Fair play is a commonly articulated and significant value in sport. From the view of financial opportunities, most European club football today is still far away from achieving this objective. In addition to the annually increasing net losses of European clubs, investors increased their impact on this football business. While some clubs can explore operating way down in the red annually, several others cannot. Therefore, this emerging trend has serious effects on the level of the competitive balance. These undesirable developments forced UEFA to spring into action. The concept of financial fair play was introduced in September 2009 This essay aims at analyzing whether the current FFP regulation concept is effective in attaining the ambitious goal to regulate the fair play. Objectives of FFP To analyze whether FFP is achieving its objectives, its principal objectives have to be analyzed. UEFAs decision to draft and implement its Financial Fair Play concept emanated from the poor financial performance of the European professional football. This came by the expanding awareness of the football fans throughout Europe. In addition to an extension of the previously licensing regulations meant to pursue the integrity and the smooth running of the competitions, UEFAs Financial Fair Play clearly defines a new monumental objective in Art. 2(2, f), which is "to protect the viability and the sustainability of the European club football." There were two different objectives identified; first, Financial Fair Play helps the current licensing regulations to improve the financial stability of the professional football clubs and making sure that they run smoothly and also ensuring that the integrity of the competitions has enough protection. Secondly, the Financial Fair Play concept prevents the possibilities of financial doping and its effect on on-field competition (Mittag 2010, p.709). To achieve these key objectives, many operational objectives are placed within the FFP Regulations. Some of the objectives include operational objectives. These objectives have good interpretation within Art as communicated by UEFA. Some of the key objectives include; to encourage professional football clubs not to use more than what they make in income, to limit the level of debt at professional football clubs, and encourage professional football clubs to settle their debts on time. Other objectives may include reducing pressure on salaries and transferring fees and restricting inflationary impact, to motivate clubs to compete with and within their revenues and ensure that clubs will sort out their liabilities on time (Mittag 2010, p.712). Impact of Financial Fair and Play on European Football. As a result of diverse regulations for national leagues in Europe, the implementation of Financial Fair Play is expected to bring a significant and long lasting effect on the competitive balance between different clubs and leagues since the load of adjusting to the new regulation is distributed asymmetrically. Based on the aforementioned objectives, there can be an analysis of whether these regulations are fruitful or not. With regard to financial stability, there have been significant delays in paying of due liabilities. This shows the weakness of UEFA’s regulatory trial to eliminate financial misconduct (Muller 2012, p.117). There are many cases including some of the renowned clubs linked to cross border transfers of their players for neglecting their due liability. Although the earlier introduction of this licensing criterion reduced the problem to some level, and at least instilled discipline in those clubs with aspirations of playing in a UEFA competition, they still had the option, of delaying payments for about 15 months without being in danger of sanctions. The most unfortunate thing was that this behavior led to a spiraling effect, with these clubs owed such payables succumbing to their own liabilities or unable to pay because of a lack of liquidity (Mittag 2010, p.717). Another similar breach of the concept of integrity as pursued by UEFA also occurs when the clubs are unable to pay their employees. This is in accordance with the terms and conditions of their contracts. This also amounts to clear violation of the principles of ethical business. Failure to pay wages harms the integrity of sporting competition and thus undermines the basic idea of fair play (Muller 2012, p.118). If a club fields players it has not paid or is unable to pay as stipulated in terms of their contracts, and later wins against clubs who are paying their squad in accordingly, then the first club seems to have used false pretenses and, therefore, reaps unjust rewards. In fielding players whose transfer fee or salaries have not been paid accordingly, they will share some characteristics with fielding suspended players. This can be viewed as not complying with the concept of integrity of the competition. Regarding regulation of external funding of clubs, the major element of the FFP Regulations is the introduction of the “break-even" rule (Art. 58-63) that requires clubs to operate within their means and should not spend more than the income that they earn. The financial performance of a football club depends on its sporting performance. This usually carries a high degree of uncertainty, making it inadequate to require a positive break-even result on year by year basis, as stipulated by the relevant income less relevant expenses. These three groups of expenses are further neutralized in terms of break-even (Muller 2012, p.120). The neutralization of such expenditure is in accordance to the objective outlined in Art. 2 (2, f) to promote reasonable spending for the sustainable benefit of football. Since these expenses are unregulated, they can be viewed as an incentive for the clubs. These exceptions will soften the break-even guideline as they increase the amount of allowed expenses for every club, leaving the door open for clubs to operate with expenses exceeding their income (Muller 2012, p.121). Finally, UEFA regulations do not specify the sanction that will follow for failing to meet the set criteria. Earlier, the range of sanctions in UEFAs Disciplinary Regulation included fines, exclusion from future competitions, warnings, disqualification from a competition in progress, and deduction of points (Maclennan 2005, p.780). In March 2012, the UEFA Executive Committee approved extension of the available coverage to withdrawal of revenue from the UEFA competitions, restriction to register new players for UEFA competitions, and a minimum number of players who may enroll for the UEFA competitions. Other likely sanctions are withholding of revenue for its own competitions and, in critical cases, exclusion from future competitions (Muller 2012, p.128). The strengthened regulatory measures on the overdue payables can be used to support the financial stability of many professional football clubs, as well as protect their creditors. Introduction of two more cutoff dates involves a current inspection as compared to the former fixed key date inspection, which may lead to sustainable achievement of the UEFA objectives. In preventing overdue payables throughout the whole year, the new requirement inhibits a spiraling effect between clubs having contracted debts toward one another (Chadwick 2008, p.149). The new break-even requirement serves the objective of eliminating distortions of the sporting competition through an excessive external funding by the benefactors, creditors or club owners. This is a sustainable extension of the regulatory requirements set by UEFA up to this date. The setback arising from continuous loss-making clubs relying on benefactors has been solved by this regulatory action. By doing so, UEFA appreciates the fact that the sporting performance in a team can be increased tremendously by external funding through investments in the players and this has the probability of shifting the competition off the pitch and into the quest for the richest club owner, benefactor, or creditor. In addition, the brand and reputation capital of football clubs gets a promotion through previous sporting merit, titles, and tradition security upheld to some level as its role in determining the ability to draw interest. Consequently, revenues cannot easily be overshadowed by unlimited cash injections by wealthy people (Sinclair 2010 p.583). Further, the four features stipulated by the FPF Regulations Act serve to soften the break-even guideline, and they tend to attract quite a bit of its strictness and rigor. According to some sources, UEFA would not have achieved approval for the building block of the Financial Fair Play Regulations (Chadwick 2008, p.152). This is because they championed for the interests of the most famous clubs, for example, the case of suspension of player contracts undertaken prior to June 1, 2010, with the primary aim of calculating the break-even result of the first two assessment periods (Sinclair 2010, p.589). Encouragement of expenditure on the youth development, infrastructure and community development, becomes clearly outlined and targeted and might be quite of immense benefit to the industrial setting in the long run. These activities have yet to be financed. In addition, the distinction between the relevant and non-relevant expenses opens up a wide scope to apply creativity and innovativeness in determining for what purposes the money is used. UEFA seems to be well aware of that, but has yet to be well prepared for disputes with clubs sounding out the limits (Sinclair 2010, p.591). It can be deemed appropriate to segregate between cash injections of equity and debt, with debt allowed to cover any acceptable deviation. This will indirectly regulate the issuance of debt. Increased indebtedness receives a monitoring threshold, which may initiate a positive effect for the future financial shape of European football clubs. The exemption of clubs making less than €5 million in the relevant income or expenses (Art. 57(2, b) can be practical applicability of the break-even demand since massive losses in European football come from the top clubs. The same can also be said regarding the approach to ignore an average break-even deficit of less than €5 million over a three-year period (Mittag 2010, p.709). Conclusion According to the UEFA, Financial Fair Play Regulation aims at rebalancing competition and strengthening the long-term financial strength in European football. Break-even requirement is needed to restrict a club’s deficits and also restrict the impact of patrons and investors. Adding up all the benefits and disadvantages, it can be concluded that FFP Regulations do not seem to be appropriate regulations because it is incomplete, of unpredictable efficiency and extremely expensive to monitor compared to its potential benefits. Reference List Chadwick, S. (2008). Releasing Latent Brand Equity: The Case of UEFAs Champions League, The Marketing Review 8(2), pp. 147-162. MacLennan, T. (2005). Moneyball: The Art of Winning an Unfair Game, The Journal of Popular Culture 38(4), pp. 780-781. Mittag, J. (2010). Towards a Europeanization of Football:Historical Phases in the Evolution of the UEFA European Football Championshi, Soccer & Society 11(6), pp.709-722. Muller, J. (2012). Financial Fair Play regulations of UEFA: An adequate concept to ensure the Long term and Viability Sustainability Of European Club football, International Journal of sport Finance 7(1), pp. 117-140. Sinclair, A. (2010). Union of European Football Associations (UEFA), Euroview Sport Limited 14(5), pp. 583-596. Read More