Written by: Tushar Katheria, Founder & Lead Counsel, Katheria Sports Law Offices-INDIA
In the complex world of sports law, disputes between governing bodies and football clubs aren’t uncommon, particularly when it comes to financial regulations. A prominent recent case is the arbitration between Manchester City Football Club (MCFC) and the Premier League (PL), which touches on key legal issues such as competition law, fairness, and football governance. The crux of this conflict centers around the Premier League’s rules on Associated Party Transactions (APTs), and Manchester City’s contention that these rules unfairly restrict competition and procedural transparency.
Case Background
Back in 2008, Manchester City underwent a major transformation when Sheikh Mansour bin Zayed Al Nahyan took ownership. The club rapidly ascended to the elite ranks of world football. However, its ongoing disagreement with the Premier League revolves around the introduction of APT rules in December 2021, which were subsequently tightened in February 2024. These rules were put in place to regulate transactions between clubs and their associated entities, but Manchester City argues that the rules clash with competition law and procedural fairness as laid out in the Competition Act 1998.
Understanding the Associated Party Transactions (APT) Rules
The APT regulations are part of the Premier League’s strategy to maintain financial transparency and prevent clubs from inflating their revenues through transactions with related parties. The rules require that all such transactions are assessed based on Fair Market Value (FMV) by the PL Board, in an effort to avoid artificially inflated deals that could skew competition. Manchester City’s challenge to these rules is rooted in their belief that the rules unlawfully restrict competition and infringe upon fair procedural practices.
Legal Challenges Raised by Manchester City
- Competition Law Concerns
Manchester City’s primary legal argument is that the APT rules violate the Competition Act 1998. They assert that the rules both prevent fair competition and hinder the club’s ability to conduct transactions with associated entities like sponsors. Specifically, the club contends that the ex-ante approval requirement, which forces clubs to seek permission before receiving funds from associated entities, imposes an unfair restriction on competition. Moreover, they argue that the rules create unnecessary delays and price distortions, effectively limiting their capacity to conduct business freely.
On the other side, the Premier League maintains that the APT rules are essential for ensuring the financial integrity of the league. Without them, clubs could artificially boost their financial standing, leading to an uneven playing field, where wealthier clubs gain an unfair advantage through inflated sponsorships.
- Procedural Fairness Issues
Manchester City also raises significant concerns about procedural fairness. One of their main points is the lack of transparency in the Premier League’s decision-making process, particularly in relation to the data used for FMV assessments. The club has expressed frustration over their inability to access the “Databank,” which contains key transaction information from other clubs and is used by the PL Board to assess the FMV. Without access to this data, Manchester City argues that they are unable to properly challenge the Board’s decisions.
Furthermore, the club highlights delays in the Board’s FMV assessments, pointing to the example of their sponsorship deal with First Abu Dhabi Bank (FAB). According to Manchester City, the PL Board took longer than the permitted timeframe to assess the deal, causing financial uncertainty and delays that they argue are inconsistent with principles of fairness.
- Recent Amendments to APT Rules
In February 2024, the Premier League introduced amendments that placed even stricter controls on related-party transactions. These changes shifted the burden of proof onto the clubs, making them responsible for demonstrating that their deals meet FMV standards. Additionally, the time for the PL Board to make FMV determinations was reduced from 30 to 10 working days. Manchester City argues that these amendments worsen the competitive restrictions imposed by the APT rules and create more obstacles for clubs wishing to engage in legitimate business with their associated entities.
A Legal Analysis
The legal intricacies of this case involve two fundamental principles: competition regulation within professional football, and procedural fairness in the decision-making processes of sports governance bodies.
- Competition Law Perspective
Applying competition law to sports regulation involves a delicate balance. On one hand, regulatory bodies like the Premier League must enforce rules to promote financial sustainability and fairness across all clubs. On the other hand, those rules must comply with competition laws. Manchester City’s assertion that the APT rules unfairly restrict competition hinges on whether these rules truly serve to preserve the integrity of the league or whether they place excessive burdens on market competition. The Premier League’s defence lies in their argument that without these rules, wealthier clubs could gain an insurmountable financial advantage, distorting the competitive balance of the league.
- Procedural Fairness
Procedural fairness dictates that administrative decisions must be transparent and just. Manchester City’s inability to access the Databank, along with the lengthy delays in their FMV assessments, raises questions about whether the Premier League’s process has been as fair as it should be. The club’s concern is that without access to critical information, they are left disadvantaged in their ability to challenge regulatory decisions. Furthermore, delays in the assessment process can have real financial implications, which should not be ignored.
Conclusion
The arbitration between Manchester City and the Premier League brings to light the ongoing tensions between maintaining financial regulation and ensuring compliance with competition law. While the APT rules were introduced to promote transparency and fairness, they must also respect legal principles that protect clubs from unfair competitive restrictions and procedural inefficiencies. This case serves as a reminder that regulatory bodies must constantly strive to create regulations that are both fair and legally sound, while clubs must engage proactively to ensure their commercial and legal interests are protected.