Is the Manchester City legal issue more crucial to Leicester than the new manager? While most Foxes fans are focused on who will be the next manager, an arguably more critical decision for the club will be made in the result of Manchester City’s legal battle against the Premier League. We’ll explain why.
Off-field issues continue to dominate football. In the last week alone, the Premier League has dropped a proposal for a salary cap due to opposition from the Professional Footballers Association, clubs have voted against scrapping VAR, and, last but not least, Manchester City has announced that they are launching legal action against the Premier League in response to the club’s alleged breaches of financial regulations.
Above all, like it or not, football fans must understand these financial restrictions. The reason is fairly straightforward. As I have stated, the financial laws governing the sport have a significant impact on the outcome of individual matches and overall league standings. In brief, teams have a limited amount of money to spend on transfer fees and wages, in addition to what they may earn via transfers out, sponsorship deals, and match-day revenue. In other words, there is little room for wealthy owners to invest their personal money in teams without breaking the rules.
Whether intentional or not, one of the primary implications is that the clubs with the largest football earnings – generally known as the big six – have a significant advantage over the rest. This situation may be fair and financially prudent, but it is having a negative influence on Premier League competitiveness.
Sky Sports claimed this week that six teams – Chelsea, Aston Villa, Everton, Newcastle, Nottingham Forest, and Leicester – may be required to sell one or more of its significant assets by the end of June in order to meet profit and sustainability regulations (PSR). Chelsea (one of the big six) has a surplus of top players that it can afford to lose, whilst the other five can not. It doesn’t take a genius to see that the sales of Ollie Watkins by Villa, Jarrad Branthwaite by Everton, Alexander Issak by Newcastle, Callum Hudson-Odoi by Forest, and Kiernan Dewsbury-Hall by Leicester will considerably weaken these teams.
And, to be clear, none of these teams are in risk of going bankrupt if they keep their top talent, so PSR’s sustainability argument is, at most, problematic. Everton, Forest, and the Foxes have all been charged, and two have already been found guilty, of simply incurring losses that exceed what PSR permits. All three have admitted as much. The main accusation against Manchester City, on the other hand, is that they previously violated financial regulations by falsely claiming the owner’s money as sponsorship income, inflating the club’s football revenue at a time when it could not compete financially with the existing big five.
The central contention in this accusation is that Etihad, the UAE state airline, provides sponsorship revenue (£400 million over 10 years beginning in 2011) that is inadequately differentiated from the club’s owners. The sponsorship continues to this day. The top-flight’s so-called associated party transaction (APT) rules, which require teams to demonstrate that any sponsorship arrangements they enter into are financially viable in the sense that they do not involve corporations with close ties to club owners, have been strengthened this year. Manchester City say that the regulations violate competition law, are discriminatory, particularly against Middle Eastern-owned clubs, and are imposed illegitimately by the majority of Premier League members.
According to the Athletic, the legal challenge threatens to weaken the Premier League’s PSR rules in general, as well as any cases made against other clubs such as Leicester City. The Foxes Thai bosses can make the same arguments as Manchester City’s owners, claiming that the restrictions are an unreasonable restriction on clubs and a hindrance to aspiration, progress, and success on the pitch.
If the Etihad club wins, not only are the 115 allegations against them less likely to be upheld, but LCFC will have a legal precedent to use in their appeal against a potential points deduction. More crucially, if the PSR regulations are found to be in violation of competition law, teams such as Leicester will have less restrictions on how much they may spend. If Manchester City loses the case, which begins on June 10th, the prospect of a new European Super League may become unavoidable. Regardless, the impact will be seismic.
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