Why FFP isn't meant to punish clubs like Man City and PSG
The public understanding of UEFA’s Financial Fair Play provisions seems to roughly go like this:
FFP exists to ensure clubs pay their bills and don’t spend more than they earn so they don’t do another Leeds, and also to prevent certain clubs from ‘cheating’ by spending wealthy owner money on players.
In this view, FFP is about punishing reckless spenders and financial dopers, stopping clubs like PSG and Man City from ‘cheating’ by posting enormous losses which get covered by wealthy owner equity.
Not coincidentally, this is also how FFP is framed in media stories. The cover of the latest FC Business magazine features the headline, “FFP: UEFA is ready for clubs that cross the line,” as if UEFA were the SEC or something. There is also in-depth media coverage in most English papers this week looking into whether either of the two above clubs will be banned from European competition for spending in excess of FFP allowances (they won’t).
(Before you continue, some resources. Swiss Ramble to my mind has one of the most comprehensive breakdowns of FFP here, and Ed Thompson has one of the best resource summaries available on FFP here).
Though UEFA’s break even rules will be rendered less effective should clubs avoid consequences for violating them, the point of FFP isn’t to punish clubs. The point of FFP, rather, is to slow both player transfer fee and wage inflation (Christopher Flanagan has written an excellent paper on this subject, which sadly is now paywalled).
There are a few clues in the legislation to support this reading. First, if FFP was primarily to prevent clubs from “doing a Leeds”—that is, spending in pursuit of competitive glory only to fail to pay their bills when the wins and the money don’t arrive as planned—then UEFA would only have concerned themselves with clubs that go into debt to pay their bills. Yet FFP also applies to clubs whose losses are covered by wealthy owners.
Yes, UEFA does allow a €45 million exception first over two years, then over three for wealthy owners able to spend equity to cover losses, but this is to slowly and reasonably transition clubs like Man City and PSG toward break even. The idea is that eventually even the sugar daddy clubs will fall in line.
The point isn’t that wealthy owners give Man City and PSG an “unfair” competitive advantage (UEFA couldn’t care less). The point is that their ability to spend limitless amounts on transfer fees and wages has an inflationary effect throughout European football. Man City’s higher wages leads to other clubs forced to compete on their level, which forced mid table clubs to raise their transfer fees and wages to compete with the bigger clubs, and so on down the foodchain.
The second clue comes in the list of exemptions UEFA allows for break even accounting. Via Swiss Ramble:
However, there are two major adjustments that need to be made to a club’s statutory accounts to get to UEFA’s break-even template: (a) remove any exceptional items from 2010/11, as they should not re-occur (by definition); (b) exclude expenses incurred for “healthy” investment, such as improving the stadium, training facilities or academy, which would lead to losses in the short-term, but will be beneficial for the club in the long-term.
Again, if the point of FFP was primarily to ensure clubs paid their bills with their earnings fair and square, then why exempt anything at all, no matter how “beneficial”? The fact that FFP specifically targets transfer fee and wage spending is another indication of its broader, far more important aim: to slow wage and transfer fee inflation.