Like all other areas of society, sport was greatly impacted by the COVID-19 pandemic. Following an initial shutdown, professional sporting competitions began to re-open. Professional football was hit particularly hard as matches were eventually held in empty stadiums. With no fans buying tickets, merchandise, or confectionary items, amongst other impacts, professional football clubs lost billions of Euros in revenue. This situation is straining the finances of professional football clubs.
This financial situation has also strained the Union of European Football Associations’ (UEFA) Financial Fair Play regulations. Adopted in 2009 to stabilize financially-struggling clubs, the regulations apply to clubs who play in UEFA competitions (the Champions League and the Europa League). In short Financial Fair Play requires clubs to 1) pay their bills on time, and 2) to “break even” – that is, not spend more than they earn. Clubs who fall afoul of these rules risk being fined, losing revenue from UEFA competitions, and being barred from future UEFA competitions.
The sudden, and dramatic, loss of revenue during the pandemic means that most clubs would, despite their best intentions, likely run afoul of Financial Fair Play. UEFA has responded in the short term by temporarily easing the rules to allow teams to incur greater financial losses, and adjusting the timeline for the “break-even” requirements.
UEFA has faced two main criticisms regarding Financial Fair Play. First, critics allege that Financial Fair Play is inconsistently enforced. Second, it appears that the “break-even” requirement allows the rich to get richer and undermines competitive balance. Complicating matters, Spring 2021 saw the sudden and dramatic rise and fall of the SuperLeague (which is now the subject of various inquiries in the UK). The SuperLeague was comprised of teams who frequently appear in UEFA competitions who were going to break away from UEFA competitions. The combination of the pandemic, criticism, and the threat of the SuperLeague appears to have led UEFA to consider longer-term reforms to Financial Fair Play.
Could changes to Financial Fair Play lead to North American-style salary caps? Salary caps are more likely to create long-term cost certainty for clubs, which is why North American team owners have been willing to endure long labour disputes to obtain them. Salary caps are also less likely to distort competitive balance, as a recent study suggests that the National Hockey League has had slightly better competitive balance since their salary cap. Nevertheless, salary caps are not administratively simple, as hockey’s Stanley Cup Champion Tampa Bay Lightning showed in 2021.
Salary caps are not unheard of in Europe. For example, England’s Rugby League has a salary cap. Salary caps recently had a short-lived run in English football. In August 2020, the clubs in League One and League Two voted to impose salary caps of £2.5 million for League One clubs, and £1.5 million for League Two clubs. However, the caps were struck down by an arbitration panel. The panel found that the imposition of the salary cap was in breach of the Professional Football Negotiating and Consultative Committee’s (PFNCC) constitution. The PFNCC is a body that includes representatives from players, leagues, clubs, and the football association. Members are required to consult players are to be consulted when rule changes affect their employment, which did not happen with the salary cap.
A European-wide salary cap system in football is likely to run afoul of EU competition law. In North America, salary caps are permitted because they are collectively bargained between the owners and the players. The salary caps are then shielded from scrutiny under American antitrust law due to the “non-statutory labor exemption” to antitrust law. For a European football salary cap to survive, it is likely that it would need to be agreed-upon amongst clubs and players, whether through social dialogue, or another mechanism.
The COVID-19 pandemic has placed a lot of strain on governing bodies, leagues, and clubs. It seems that the way out of this crisis could be much-helped through closer consultation with players.
Dr. Ryan Gauthier is an Associate Professor at Thompson Rivers University, Faculty of Law.
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