Meet the Author: Gaetano Taormina
Author of UEFA’s Financial Fair Play: Purpose, Effect, and Future, Gaetano Taormina.
Meet the Author is a new interview series where we discuss a recently published article in the International Law Journal with its author. In the first installment, we spoke to Gaetano Taormina, one of the authors from the recently published Volume XLII, Issue 4.
Taormina’s article, UEFA's Financial Fair Play: Purpose, Effect, and Future, is about Financial Fair Play Regulations in the world of soccer. Recent astronomical transfers of players such as Paul Pogba (EU€96 million), Kylian Mbappé (EU€178 million) and Neymar da Silva Santos Junior (EU€221 million) have raised questions regarding the governing body of soccer in Europe, UEFA, and the enforcement of its Financial Fair Play Regulations, which were put in place to limit exorbitant transfers and teams spending beyond their means. You can read the note here.
What prompted you to write this note?
I am a huge Inter fan. More generally, I am a supporter of Italian football (“Calcio”). Outside of maybe Juventus, Italian teams incurred hard times for the better part of the past decade. To think that the last time Italy was home to a Champions League winner was when Inter won the tournament in 2010. Since then, Juventus has been the only Italian team that challenged, though unsuccessfully, in the Champions League. Even they, until recently, were financially outmatched by Real Madrid, Barcelona, and other financial powerhouses.
On top of this Champions League drought, it felt that Italy experienced a mass exodus of talent. Italy used to harbor perennial Champions League contenders but completely fell off because the teams could not purchase talented players and could not manage to keep their own. The talent drain also coincided with a period of ownership changes. As a fan, I wanted to know why all of this was occurring. I wanted to know why Inter and other historically prestigious Italian clubs were failing to compete in the transfer market and consequently, on the field. I also wanted to learn about why the ownership landscape was changing. I kept hearing how FFP was to blame and that the teams had overspent in the past. It made me curious and motivated me to research the issue. After researching, I thought that it would be important information for any football fan, which led me to write this note.
How do you explain the astronomical sums of money that are being spent on players in recent years?
I would say there are two causes of these astronomical sums of money being spent on players. The first, and probably the most significant cause is the increase in commercial revenue, specifically, TV revenue. Teams simply have more money to spend on players because they are earning more on lucrative television deals. This has caused the price of players to inflate. To put this into perspective, Zinedine Zidane, one of the greatest football players of all time, was bought by Real Madrid for 46.5 million pounds in 2001, while still in his prime. Now, that figure is roughly what Chelsea spent on Jorginho this past summer. Don’t get me wrong, I think Jorginho is very talented and I hope he does well for the sake of the Italian national team, but he is no Zidane. The second cause is the diverse ownership. For example, it used to be the case that Italian teams were primarily owned by Italians. As of April 15, 2019, only 2 of the top 5 teams in Italy have Italian owners. The new owners have brought business acumen, vast connections, and most importantly, funds that can be invested into the club. These owners have helped teams invest in future financial and international success which has produced higher revenues that can be used on player transfers.
One of the proposals you mention in your note concern a spending cap, which sounds a lot like what you have in the NFL and the NBA. Do you see a move towards such a system in European soccer?
I hope so! But if I’m honest, I would be surprised if such a method was implemented. I think UEFA has shown a reluctance to evaluate such an option and such a change would be met with extreme opposition from large clubs who would lose one of their competitive advantages. Perhaps if the spending limit is extremely high, but I think that is very unlikely. That is why I have proposed other modifications to help ameliorate some of the issues.
Several large clubs have recently been subject to transfer bans. Some of these have been for FFP violations, while others have been for breaches concerning the transfer of players who are under 18. Do you think these transfer bans are effective measures to dissuade clubs?
I think these transfer bans are extremely effective in dissuading clubs because it is very difficult for clubs to structure a team that can compete for multiple years without being at least slightly refreshed or improved during a transfer window. The only team that I can remember doing so would be last year’s Napoli team. That team was mostly, if not entirely, the same as the year before. They finished second to Juventus and broke their own points record. However, I think Napoli fans and calcio analysts would say that they could have benefited from a player purchase or two in their hunt for an Italian league title (also known as the “scudetto”). Moreover, Napoli was only focused on competing for the scudetto and had little to no European aspirations. I think the 2016 Barcelona team is a clear example of how impactful these transfer bans are. Barcelona incurred a transfer ban that took effect in 2015 and barred the club from participating in both 2015 transfer windows and the 2016 January window. In 2014, they bought Luis Suarez, Ivan Rakitic, Jeremy Mathieu, Claudio Bravo, and Marc-Andre ter Stegen in anticipation of this transfer ban. This team was one of the most dominant teams I have ever watched. They went on to win the treble (Copa del Rey, La Liga, and Champions League) in 2015, but in 2016 were knocked out of the Champions League and narrowly held on to the La Liga title. Barcelona’s 2016 struggles seemed to have been a result of fatigue and a need for reinforcements, which the club would have been able to cure if not for the transfer ban.
Many soccer fans will remember the 2003 purchase of Chelsea by Roman Abramovich as a turning point for rich, foreign owners in European soccer. Now it seems to be commonplace that some of the biggest clubs in the world have billionaires as owners. What are some of the risks that come with such ownership structures in the world's largest soccer clubs?
As discussed in the note, the large risks that come with such ownership structures are that they can lead to an overreliance on the owners to fund the clubs’ investments and that the owners will push the clubs to make risky and expensive investments because it will bring the owner popularity amongst the fans and financial success. Such risks can lead to financial ruin for football clubs. One of the prominent reasons for the promulgation of the Financial Fair Play Regulations was to curtail such overreliance and risk taking.
What are some of the legal issues that FFP faces?
The prominent legal issues that FFP faces are anti-competition challenges under Article 101 of the Treaty on the Functioning of the European Union. FFP has the effect of protecting the elite European football clubs. As the note discusses, it has implemented a relative spending cap where clubs can only spend in proportion to what they earn. For example, if a club earns a total of $100 million in revenue, they can spend $100 million on players during the transfer window. However, not all teams earn the same level of revenues. The titans like Manchester United, Barcelona, and Real Madrid earn significantly more than most teams. As a result, they can continue to spend more on players and keep their competitive advantage. This is evidence that FFP negatively affects competition because it insulates those pre-FFP teams that had large established revenue streams from those that have yet to achieve such financial success.