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By John Cassels and Daniel Geey
With transfer window spending on the up accompanying multi million (and sometimes billion) pound TV deals, one would assume clubs are flush with money to spend. However, the advent of Financial Fair Play has refocused a club's objectives to balance their books. This has been backed up with the European Commission (the Commission) looking closely into a number of transactions involving clubs like Real Madrid and PSV Eindhoven in order to assess whether they have benefited from favourable treatment from public authorities.
The press release describes state aid as involving "the use of public resources [to] provide an advantage to entities carrying out economic activities. The measures are likely to distort competition and to affect trade between Member States. They are therefore in principle incompatible with the EU Single Market."
The test used by the authorities is whether a private investor would have acted in the same way in the particular circumstances. In the majority of examples set out in the press release, Dutch municipalities waived debts, lowered rents or bought back land. PSV are reported to have received €48.3m from the Municipality of Eindhoven when it bought land from PSV and leased it back to the club. Similarly, Real Madrid may also soon be under formal investigation for payments the Madrid Council made to the club as part of a property transaction in the late 90's which was only recently adjusted to provide an additional reported €22.7m to the club. There are also question marks over West Ham's move to the Olympic stadium with Newham Council contributing over £40m+ as part of a profit sharing scheme.
The consequences of the state providing assistance to clubs could lead to repayment of the illegal aid plus interest. The aim of the remedy is to remove the unfair advantage granted to the club and to restore the market to its original state before the aid was granted.
In an age of the £85m+ player transfer, the public may not have too much sympathy for clubs having to pay back public money. Some may question why it was given in the first place.
If you would like to discuss these issues, please do not hesitate to contact John Cassels at firstname.lastname@example.org or Daniel Geey at email@example.com.