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European clubs move towards the salary cap – and clear the legalities en route

by Christophe Jost

For years, each and every time the discussion has addressed the subject of a salary cap, that such system would be totally illegal under EU law and thus the discussions were pretty much dead on arrival or rather dead before the discussions have even arrived..

Indeed now that League One and League Two have each agreed to proceed with a salary cap the PFA have come out against it saying ‘it could be unlawful and unenforceable’.

This unlawfulness has been accepted as fact – a restriction of the right to self-determination, free choice of job and antitrust regulations, much like some of the reasons why the  Bosman ruling decided that players were free to move as they wanted once their contract had run out.

And I must admit, I have been of the same opinion, yet I always wondered how in the US, the NFL, NHL and the NBA were able to enact a salary cap considering that the US is, theoretically, the example in terms of liberalisation and free markets. Which, by the way, is far from the truth, but this is another subject.

Anyway, as said, no discussion could be had as it was quashed from the beginning.

However during the pandemic lockdown in Germany, two studies were mandated to once and for all get a serious opinion as to the legality of a salary cap in football.

This was part of a set of “reflections” held at the highest level of football in Germany. By highest, I mean stratospheric compared to the at best mole-hill levels that we see in terms of reflections and strategy at the FA.

The studies were mandated by the president of the DFB (the German equivalent of FA) Ethics Committee Mr Opperman. It must be said that he has been a member of the German Parliament since 2005 and is now its vice-president.

Seeing that German football was in dire straits with tens of clubs nearing bankruptcy, he decided to ask for help from the minister in the German parliament in charge of the economy and the minister in charge of European affairs to study the problem and deliver their conclusions.

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So we are not talking of some legal outfit wanting to get some kind of publicity or trying a stunt. This is a serious initiative resulting in two independent assessments about the legality of a salary cap in football.

And you may be interested in knowing that the studies came out recently and all VALIDATED the legality of a salary cap.

Yep. They truly did. Under EU law. In no uncertain terms.

As was pointed out, some professions do already have to live with salary caps in some countries, like doctors, lawyers, etc. So this is not something outlandish and impossible.  Besides other leagues have already enforced salary caps as we have noted: the NFF, NBA, and NHL in the US for example.

The rationale behind the salary cap being introduced is

  • It compensates for the loss of equal opportunity in European football,
  • It accentuates the competition,
  • It would stop the massive growth of debt seen at club level by cancelling the inflation war we are witnessing on a European level,
  • And, last but not least, it would be of a very important interest to the national association and to the general public

So here you have it, delivered in no uncertain terms : a salary cap is legal, and would be of general interest.

Now in terms of how to do it, the recommended way is that of going through the umbrella organisation, in this case UEFA, and not through passing a law – which is how England, and other non-EU nations would be brought into the regulations.

Indeed working via a law at national level when addressing a European issue is generally not a solution. It would create a problem for the country enacting such law, if vested interests worked to block it. So a global solution has to be found at the UEFA level.

One solution, which has been proposed by Mr Ceferin, the UEFA president, would be a ‘luxury tax.’  In this any club spending more the the cap would have to pay a tax equivalent to the amount above the salary cap.  This amount would go in a solidarity fund to be shared among the clubs not spending all the salary cap.

Both reports agree in no uncertain terms on the fact that a salary cap would augment the uncertainty of games, thus be a plus for the paying customer.  And I guess we cannot fault them on that.

Come to think of it, maybe UEFA ought to add a games cap for referees….no more then twice the same team in the course of a season…..this would make it harder for some English teams to win the league or qualify for European football, which in turn means they’d be less fit when playing in Europe, thus levelling the playing field as well…

Hmmm maybe it would be better if you just disregarded this last paragraph, this is total science fiction!

The very interesting thing about what is happening now, is that Mr Oppermann, now in possession of these studies, will present them in Brussels this autumn. If Ms Verstagen, in charge of competition at the EU Commission level, were to get behind it, the traction would have a chance to get things moving. In which case the PL may have no other solution but abide by the new rules.

I can understand individual players not being happy with seeing their potential earnings possibly curtailed. Then again, what good is a big salary if the league sees clubs go bust and end up unable to sustain its business model economically?

So in England, it sure looks like football’s business model is being assailed from external forces and internal forces. This is going to be very interesting to watch develop.

One thing is sure: Untold Arsenal will keep you posted about what the UK press at large does not tell you!

Other recent stories missed by the media but published in Untold

 

7 comments to European clubs move towards the salary cap – and clear the legalities en route

  • Thenry

    Will they do that to general business like banking insurance and retail where CEOs and workers have huge disparities bigger then football
    Bankers get bailed out every year now but no caps on their salaries or bonuses

  • omgarsenal

    YES………..

  • Tim Hogan

    The idea of a salary cap sounds intriguing but will the ‘big’ club’s owners allow it?

    I do not know if these figures are accurate but according to an article in the Mirror (19/11/2019), who cite sportrac.com as their source, the clubs with six largest average salaries per player, per week in the Premier League are as follows: Manchester City (£115,000), Liverpool (£100,000), Chelsea (£95,000), Arsenal (£92,000), Manchester United (£90,000). Interestingly, Sheffield United (£9,000) have the lowest figure.

    For the purpose of the following paragraphs instead of calculating the average Premier League salary I simply took the median (middle) value, which is £50,000.

    I have no idea how any salary cap might be set or implemented but here is a very naïve scenario. Considering the idea of a ‘wealth tax’ and the objective of creating more competitive leagues I guess, with the information about average salary spend in the first paragraph, the cap would be set at around £50,000 per player per week. If this were the case Arsenal might have to pay a luxury tax of £42,000 per player per week to give to the ‘poorer’ or more prudent clubs in the Premier League and Manchester City’s owners would have to find £65,000 per player per week.

    So the luxury tax offers the potential to be particularly onerous for the ‘bigger’ clubs if they decide to keep offering inflated salaries, and if they do, it will be a potential windfall for the ‘smaller’ clubs. Over time the difference in salaries should decrease to such an extent that the top players will be spread throughout the Premier League clubs. Arguably, if this happens the recent threat posed by Chelsea and Manchester City to the established elite for European places will be small beer – instead of six or seven clubs competing for four places it might be twelve or more clubs!

    What would be the impact of this increased competition? In Arsenal’s case one can already see that the increased competition has meant the ‘fourth place trophy’ has been increasingly difficult to win recently. Even more competition might mean the Europa League couldn’t be relied upon either in Arsenal’s business model.

    What does increased competition mean for the big clubs future sponsorship deals? Will Chevrolet want to pay £75 million per year for a Manchester United team fighting for twelfth place?

    When these salary caps are mentioned U.S. sports are often cited as the model for demonstrating how effective salary caps can be. What is not often mentioned are the differences between U.S. sports and European football. When did Arsenal last have a successful college draft pick or when did they agree a contract with a senior professional who had been ‘cut’ from a rival team and when did you last see the Dallas Cowboys or any other NFL team get relegated?

    For the reasons explicitly or implicitly mentioned I can’t see billionaire owners agreeing to a salary cap like the one I described simply because I think it would have a deflationary effect on the whole football industry. I can only see them agreeing to a salary cap that cements their club’s position at the top table like they did with FFP; otherwise, I think they’ll make good on their previous threats and set up a European or even World League.

  • Tim, I think that the route to the salary cap will be Uefa and it will be imposed on all the clubs – and be approved of by the vast majority of Uefa’s membership. The only way for the richest to get out of it will be to form their own little Rich Clubs League – but they would then be excluded from the Champions League and the Europa League, which is something of a disinsensitive.

  • Tim Hogan

    Tony,

    If missing out on Champions League money is going to be the only thing stopping the elite clubs setting up their own league then …

    In my opinion, if the elite clubs don’t like the look of the salary cap and its future implications for their entrenched positions at the summit of the game – and assuming they can organise themselves – then I am certain they will make sure ‘their’ league will more than compensate them for any loss of income from their domestic leagues and not being involved in the Champions League; their league would become the top layer in the football pyramid and the Champions League would be nothing more than a second tier competition for the ‘little clubs’.

    Like you, I look forward to seeing how this salary cap plan moves forward and what implications it has for football’s future.

  • English League 1 and League 2 clubs have just agreed salary caps.