Posts Tagged ‘financial fair play’

A lesson from football: Labour needs to temper its regulatory reflex

13/06/2014, 11:04:06 AM

by David Butler

A few weeks ago, the first set of Financial Fair Play (FFP) fines landed upon the desks of the owners of Manchester City, Paris Saint-Germain and a host of other football clubs. UEFA’s new system is meant to make European football fairer, limiting the ability of clubs to generate losses in search of better league places in search of European glory/a group stage exit in the Champions League. Critics have accused the reform of strengthening the power of the big clubs. These critiques of FFP offer important insights for politicians looking to intervene in markets.

There is a convincing claim that FFP embeds oligopoly. Its structure strengthens clubs like Manchester United, Barcelona and Bayern Munich whose historic hegemonic position in their respective leagues means they are major profit-making bodies. Clubs who wish to compete with them need to make significant investments to be able to match the transfer kitty, wage offers, and footballing status offer by the big teams.  Relative insurgents like Manchester City or AS Monaco rely on owners who are able to invest a sum close to the GDP of a small African nation. These investments are overwhelming loss-making, at least initially, due to the huge cost of building a squad capable of challenging consistently for Champions League places. FFP means that fewer clubs will be able to pay the sunk costs often needed to enter the market for Champions League places within their respective nation. Bad regulation may well sustain the wealthy clubs and stymie greater competition.


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