Justification of Financial Fair Play(FFP).
Should UEFA follow the example of NHL establishing an analog of ‘Salary Cap” for European football clubs.
The UEFA (Union des Associations Européennes de Football) and above all the UEFA president Michel Platini are very concerned about recent develop- ments in European club football. Many clubs have reported repeated and worsening deficits which have led to record-high debt levels during the last years. In addition, private investors and other equity partici- pants have increasingly extended their influence into professional football clubs. Hence, some clubs have experienced liquidity shortfalls and have been unable to pay other clubs or their players in time. In contrast others have climbed up to the top of European club football with the help of external money. The best- known example is FC Chelsea with its patron Roman Abramovitch, who has spent about half a billion euros within the past decade to finance the club’s quick ascent to being one of the leading teams in Europe. Moreover, today’s European club football is basically an oligopoly consisting of about ten clubs (including FC Barcelona, Real Madrid, Manchester United, FC Chelsea, AC Milan or Bayern Munich and others, called the “Untouchables” by Deloitte), who will continue to move further away from other cubs until the gap can no longer be closed (Figure).
These developments are thought to threaten the financial stability and distort the competitive bal- ance not only between clubs but also between leagues in European club football. In order to ensure
long-term financial stability and to restore the com- petitive balance, the UEFA’s Executive Committee, in agreement with the European Club Association (ECA), unanimously approved a set of rules called “Financial Fair Play” that will come into force with the end of the current season in 2012 (UEFA 2011a). From the 2013/14 season on, all clubs will have to ful- fil the new rules and requirements in order to obtain a license, the precondition for participating in the UEFA Champions League (UEFA 2010a). Financial Fair Play implies that for the first time there will be a harmonized, European-wide and much tighter reg- ulation for all European clubs. According to the UEFA, Financial Fair Play provides a regulatory framework that prevents clubs from fall into a debt spiral while ensuring competition based only on the resources they generate on their own. Furthermore, Financial Fair Play is based on a more general phi- losophy of sports as recently published in the UEFA’s “eleven key values of sport”, which draws primarily on the European sports model of solidari- ty and subsidiarity (UEFA 2011b).
Fortunately, football is not the first sport where that kind of policy is to be established, so that it is possible to approximately predict the consequences of the limit. National Hockey League ('NHL') has a long-term experience in that case. In ice – hockey there is a policy called «Salary cap», which has...