In this new edition of MatchPoint Talks, discover how financial fair play is transforming sports leagues, from its impact on club financial management to its role in promoting fairer competition.
Pablo Cazorla, a lawyer and academic with extensive experience in labor and sports law, analyzes key cases and answers the biggest questions surrounding this crucial topic.
Let’s get into the conclusions, and now we can discuss them or ask me any questions you deem appropriate… Financial Fair Play guarantees the economic stability of clubs and promotes more equitable competition.
Yes, but there is debate about the whole issue of fairer competition at the national level, yes, but not at the international level. There is debate!
What is Financial Fair Play? This concept is a set of rules established by football authorities to ensure the financial stability of clubs and promote fair competition.
This measure was implemented in the Spanish league in 2011 with the aim of ensuring the financial stability of teams and preventing some teams from spending more than they generate in revenue.
Financial Fair Play arose as a result of the fact that for many years, first division football was not fully professionalized, and increasingly huge amounts of money were being transferred and debts were generated.
These debts, often due to mismanagement, led to the disappearance of historic clubs or their relegation. This undermines the social impact that a club of a certain caliber has, generally linked to a city in Spain of a certain importance.
Thus, in 2011, measures were taken regarding this issue and what is known today as Financial Fair Play was implemented. It truly gained momentum starting in 2014, with the arrival of the current league president.
To prevent clubs from spending more than they earn, this is obvious. Ultimately, the goal is to avoid the consequences of this imbalance: club bankruptcy, unpaid debts, relegation, and even the disappearance of historic clubs.
Thus, Financial Fair Play is intended to prevent excessive indebtedness and promote long-term financial sustainability.
Budgeting standards, financial audits, and sanctions are the three tools with which the league, in some way, controls and implements this Financial Fair Play we are discussing.
Clubs must present balanced budgets that reflect real income and expenses. This is an important issue: real income and expenses, not income or expenses that are somehow disguised or conditioned.
See, for example, what we all know about the “state clubs” of Arab financial funds, cases with teams like Manchester City, Paris Saint-Germain, and others of that nature, which unbalance the overall balance and cause problems.
Financial audits conduct periodic reviews to verify the accuracy of the financial information provided by clubs, imposing sanctions if non-compliance occurs.
If a breach of Financial Fair Play is found, the league can impose sanctions ranging from fines to a ban on registering new players. In other words, the issue of the 1+1 rule.
FC Barcelona somehow circumvented this rule last summer, taking advantage of Christensen’s injury. For four months, they registered two new players because they could count 80% of Christensen’s salary as an expense to register these two players. This ended in December; in December, they were counting on some income, first from the Nike contract (renegotiation of the Nike contract) and later from the sale of VIP boxes.
Apparently, a series of injunctions were requested to allow time for registration, because the club itself presumably saw that it wouldn’t be able to submit the documentation within the deadline. This request was rejected, and the federation (RFEF) and the league ended up deregistering the players.
Notwithstanding the fact that the documentation and income subsequently arrive, allowing the squad cost limit to be increased, the problem is that since they have been “removed from the list,” these players’ registrations have been terminated, as another rule comes into play that prevents them from being registered again by the same club in the same season.
FC Barcelona then receives the money from the sale of the VIP seats, but it was already past the deadline to register the two players, so the league does not register them. FC Barcelona then appeals to the CSD (Higher Sports Council), and the latter does grant the injunction, allowing the players’ provisional registration. The injunction is, if I’m not mistaken, three months.
La Liga and the RFEF harshly criticize this ruling, pointing out that it undermines the regulations designed to guarantee the financial sustainability of clubs. As always, it generates controversy, and there’s a debate that’s now on the agenda, where we see the recently elected president of the Spanish Football Federation alongside the president of La Liga… Well, emphasizing what could be the non-compliance with these types of issues related to Financial Fair Play.
The CSD understands that there is room for an injunction, because the commission that in some way decided on the registration of these players, as it is not clear whether it was the appropriate one and the one cited by the league and federation…
Well, there is enough debate, according to the CSD, to grant the injunction, which does not mean that these players have finally been permanently registered for the rest of the season; we will have to see what is resolved.
Regarding the substance of the matter, the injunction ultimately refers to the fact that, since there are doubts about what might happen to avoid permanent harm and without any possible solution for the players later, well, let’s register them provisionally for three months and see what is resolved later.
Let’s get into the conclusions, and now we can discuss them or ask me any questions you deem appropriate…
Financial Fair Play guarantees the economic stability of clubs and promotes more equitable competition. Yes, but there is debate about the whole issue of fairer competition at the national level, yes, but not at the international level. There is debate!
Compliance with these regulations is essential to avoid sanctions and ensure long-term sustainability. The league’s squad cost cap is key to maintaining a balance between income and expenses.
This measure has forced clubs to be more cautious in their financial operations.
Fines, player registration bans, and, in serious cases, exclusions from competitions are measures implemented to ensure compliance with financial fair play and maintain financial discipline in professional football.
We look at the case of Mallorca, whose well-known exclusion from European competition in 2011 demonstrates the severity of sanctions for meeting financial criteria. Cases like that of Dani Olmo (FCB), which is currently on the agenda, demonstrate the importance of having control over the club’s finances.
The regulation of the Messi case brings to the fore the different regulations of Financial Fair Play in each country and the consequences thereof.
Is it fair? Is this system effective? Well, it’s a debate, I certainly believe it is, and yes, if I may speak out on the matter, it’s a necessary system. That is, there must be oversight by the league and the action in some way that helps teams and clubs be properly healthy in the medium to long term. Of course, this entails painful, costly decisions in the short term, which from a sporting point of view may even be considered detrimental.
But in the end, in the medium and long term, the club is better financially, healthier, and sustainable in the long term, which is the important thing: since it promotes long-term financial sustainability, it prevents clubs from becoming excessively indebted, protects the economy of football itself, and also offers an advantage for clubs with greater resources or financial backing, like PSG.
We have seen before that these types of clubs, with revenues coming from Qatari funds, do indeed have a certain advantage when these revenues are not controlled. The regulatory differences between leagues create competitive inequality; smaller teams may face greater restrictions, limiting their strategic options in the transfer market.
