Football needs to avoid a tyranny of the rich

By Matthew Brooker

The Premier League is a staggeringly successful product. Broadcasts attract a global average of more than 600 million viewers a match, almost double the combined audience for the next two biggest European soccer leagues, Spain and Germany. That’s also close to 10 times the number who watched this year’s Super Bowl outside the US — the showpiece event of America’s most popular sport. With that level of dominance, and the revenue that goes with it, squabbles over money are inevitable.

Hence Manchester City Football Club’s challenge to the Premier League’s rules governing financial transactions between clubs and related parties, which concluded last week with a 175-page ruling from a tribunal panel of three retired judges. Who won? Answering that isn’t as straightforward as judging the outcome of a football match, where the score tells the story. The club and the league both claimed victory after the verdict, and each has grounds to support its stance. On balance, the league’s governance model looks to have emerged relatively intact — and that should be welcomed by all who hope for the competitive health of a sport that contributes more than $10 billion to the UK economy.

Manchester City, the current league champion, scored some eye-catching wins. Most notable was the tribunal’s judgment that the associated-party rules, introduced in 2021, contravene competition law because they exclude shareholder loans. The panel also found that the league applied the rules in a procedurally unfair manner when considering two sponsorship transactions that Manchester City wanted to sign with Etihad Aviation Group and First Abu Dhabi Bank. The Premier League blocked completion of those deals on the grounds they were above fair market value; those decisions must be set aside, the tribunal ruled.

The principle at stake here is simple. Deep-pocketed owners shouldn’t be able to boost the competitive prospects of their clubs through artificial means. The era of multibillion-dollar investments by state-linked funds, US private equity groups and rich individuals has distorted the playing field for UK and European football. In response, organizing bodies have imposed limits on the amounts that clubs can spend and the losses they can accumulate — known in England as profit and sustainability rules. Any team contravening these limits faces penalties. But there are potential ways around the restrictions.

One is to sign inflated deals with companies that have connections to the club’s parent — as Manchester City, owned by Abu Dhabi United Group for Development and Investment (a vehicle controlled by a member of the emirate’s royal family), was alleged to have done with the Etihad and First Abu Dhabi Bank agreements. Overpriced transactions fatten the bottom line and give clubs more financial firepower to spend on players.

Sponsorship deals aren’t the only way to burnish profitability, though. An owner that extends an interest-free loan achieves the same effect, saving the club the expense of commercial borrowing. One technique increases revenue; the other reduces costs. Two-thirds of the Premier League’s 20 clubs have shareholder loans; Manchester City doesn’t. To consider one and deliberately exclude the other, as the league’s members did when adopting the associated-party rules, is the basis of the club’s assertion that the voting rules create a “tyranny of the majority.”

It’s an outlandish claim. If other clubs are tyrannizing Manchester City, they clearly aren't making a very good job of it. Having been a middling also-ran prior to the Abu Dhabi takeover in 2008, the club has won six of the last seven Premier League titles — a record of success unprecedented in more than 130 years of English top-flight competition. It has also become Britain's biggest football club by revenue. Moreover, Manchester City sided with the tyrants when members voted 19-to-1 to exclude shareholder loans from the scope of the associated-party rules, according to the Premier League.

The tribunal ruling, while it found for Manchester City on several points, is far from a wholesale condemnation of the Premier League’s regulatory regime. Rules have been “carefully designed,” the “system as a whole is fair” and the outcome is “a complex and carefully drafted scheme which is the product of detailed negotiations” are among the observations. The Premier League said the rules could be amended quickly and effectively to make them compliant with the law. Manchester City responded by criticizing the league’s summary of the judgment as inaccurate, declaring the associated-party transaction regulations void and warning the Premier League and member clubs against “knee-jerk” changes.

If nothing else, that signals that the English champion will fight every legal challenge tooth and claw as it contests 115 charges of breaking the profit and sustainability rules, in a separate ongoing case. Whether this judgment has really dealt the supervision of related-party deals a mortal blow is questionable, though.

The rules are an essential element in a wider regime designed to constrain the spending of English football’s wealthiest owners. Those who chafe against such restraints should remember why the Premier League became so popular in the first place — its tradition of vigorous competition. Unfettered spending can only lead to further polarization between the richest and the rest, ultimately undermining the game’s appeal.

A tyranny of the majority beats a tyranny of the rich. Better than either would be fair competition on a level playing field. If the Premier League and its bickering members can’t achieve that, perhaps it will be for an independent regulator to do so.