Massive news off the pitch last week, as The Times reported that Manchester City have launched legal action against the Premier League, the competition where they are the reigning champions.
City argue that the league’s Associated Party Transactions rules are unlawful and anti-competitive. They further assert that the rules aim to stifle their on pitch success and discriminate against Gulf ownership, while looking to safeguard their rivals’ commercial advantages.
In addition, City are seeking damages for deals that were affected or lost as a consequence of these rules. Any damages would have to be paid by the Premier League, whose shareholders are its 20 member clubs.
The case will be settled after a two-week private arbitration hearing by a panel of three independent lawyers, starting today, which could have major ramifications for Premier League governance.
Associated Party Transactions (APT)
Rules on Associate Party Transactions had already existed in the Premier League handbook, but they were tightened up in December 2021 following the Saudi-led takeover of Newcastle United.
Essentially, the rules are designed to ensure that club owners cannot use their vast wealth to inflate sponsorship deals, leading to higher revenue with a consequent increase in spending power and an ability to get round Financial Fair Play restrictions. The Premier League would argue that the objective is to maintain competitive balance.
Previously, such deals were only considered to be a related party transaction if they were noted as such in the club accounts. However, the updated regulations say that if the Premier League’s board has reasonable grounds to suspect that it is an associated party deal, then an independent firm will assess whether it is at fair market value.
Given the limitless funding available to sovereign states, it is felt that the risk would be greater with clubs like Manchester City (and indeed Newcastle United), which helps explain why City are unhappy with the tougher rules, while the majority of their Premier League rivals would be in favour.
Legal Position
This article will not attempt to address the legal position, as others are far more qualified to comment on those specifics than me, though it has been revealed that City’s claim is that the rules are unlawful, being contrary to the Competition Act 1998. In contrast, the Premier League’s advisors believe that they are compatible with English law.
However, it is not entirely clear whether City are looking to abolish the APT rules, which would be a nuclear option, or merely to water them down a little.
Tyranny of the Majority
Nor will we look at the questions raised by City’s bizarre description of the rules as the “tyranny of the majority”, which is strange way of describing what to most eyes simply looks like democracy in action.
When the philosopher John Stuart Mill coined this phrase, it was in relation to mob rule, as opposed to a group of football clubs. To pass any initiative, the Premier League requires 14 votes out of the 20 Premier League clubs, i.e. a two-thirds majority, which does not seen inherently unfair.
Financial Restrictions
No, this blog will instead focus on whether this “tyranny” has restricted Manchester City’s development by taking an in depth look at the club’s financials from three points of view:
City compared to English clubs
City compared to European rivals
Premier League compared to other leagues
The third analysis is because City played what I’m going to call the “Richard Masters” card by expressing concern that the fair value rules would cause damage to one of England’s best known exports, i.e. by weakening the Premier League’ competitive position against other leagues.
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