UEFA Financial Fair Play Regulations
UEFA Financial Fair Play Regulations
Financial Fair Play (FFP) aims to ensure the financial viability of European club football by monitoring overdue payables and imposing cost control rules designed to prevent clubs from incurring unmanageable debts.
The goal of these requirements: ensure clubs spend only what they earn and encourage investment in stadiums, training facility infrastructure, and youth development programs. However, some argue these regulations violate EU competition law.
Solvency Pillar
The Solvency Pillar of UEFA FFP regulations provides reporting, disclosure, and supervision rules that will enhance consumer protection, deepen EU market integration, and boost the international competitiveness of insurers while simultaneously creating new requirements for governance and risk management.
The new UEFA Financial Fair Play Rules are intended to improve the economic sustainability of European clubs and secure their future long-term. They represent an evolution of an earlier system that had led to significant improvements in club finances: in 2009, net losses for top division clubs stood at EUR1.6 billion; by 2018, these had decreased to EUR140 million.
UEFA Financial Fair Play (FFP) regulation mandates that clubs submit annual financial reports. Clubs must present a descriptive section and various quantitative forms to their supervisory authority, such as an Own Risk and Solvency Assessment (ORSA). Furthermore, reinsurance industry participants are obliged to have formal governance arrangements.
Stability Pillar
The Stability Pillar of UEFA Financial Fair Play Regulations seeks to prevent European football clubs from spending more than they generate in profits, thus enabling UEFA to monitor all clubs’ balance sheets and promote responsible investment – ultimately decreasing losses or going into administration for clubs that record large deficits.
This action shows that UEFA recognizes the risks posed by their new regulations and has taken steps to mitigate them. Furthermore, this shows UEFA values transparency and accountability and supports proportionality principles.
Even though substantial scholarly attention has been paid to FFP’s compatibility with EU competition law, much of the discussion centers around Article 101. I argue in this article that UEFA can satisfy both requirements of Article 101 by showing how FFP restricts competition by object and effect; however, several additional issues must still be addressed, such as the definition of spending and how custom t-shirt sponsorship deals are valued.
Cost Control Pillar
The Cost Control Pillar of the new UEFA FFPRs is one of the biggest additions and most contentious changes. It is intended to address recent trends of clubs spending more than they earn and jeopardizing their long-term sustainability. This provision targets excessive player wages and agents’ fees as a potential source of trouble for clubs.
This pillar contains the squad cost ratio (SCR), a new way of measuring club expenses relative to total income. This indicator includes salaries, non-monetary benefits, image rights payments, signing-on fees, and amortization of transfer fees.
UEFA would argue that its SCR is necessary for meeting its goal of financial fair play and passes the proportionality test laid out in Article 101(3); however, it remains challenging to predict whether either the European Court of Justice (ECJ) or European Commission (EC) would accept this argument and apply EU law differently between horizontal and vertical undertakings; hence an unfavorable EC opinion is unlikely to provide much guidance as to their legality.
Financial Sustainability Pillar
UEFA established financial fair play (FFP) rules to control European football clubs’ spending habits, which have reached unsustainable levels and threaten their foundations. Under these new guidelines, clubs must not record losses exceeding PS105m over three consecutive seasons; wages paid before 1 June 2010 will count toward this calculation as new contracts. Renegotiation agreements also count.
According to Valerie Kaplan’s research, scholars have noted that this approach violates Articles 101 and 102 of the TFEU. Valerie explores these claims further while proposing an innovative solution that allows UEFA to comply with competition law while meeting FFP’s goals while at the same time decreasing COVID-19’s effect on clubs’ financial sustainability and increasing their competitiveness.
