Proceedings of the 5 th ESEA Conference
Edited By Oliver Budzinski and Arne Feddersen
The Competition Economics of Financial Fair Play
This paper provides an economic analysis of the competition effects of UEFA’s financial fair play regulations. It concludes that the restrictive effects of the break-even rule cannot be justified by a legitimate objective defense (according to European competition policy) because significant financial problems due to overinvestment are not inherent to European football.
financial fair play, sports economics, competition economics, European competition policy, football, soccer, overinvestment, rat race
Professional sports – and European-style football1 in particular – is a serious commercial business with considerable turnovers and revenues. As a consequence, powerful market participants experience incentives to reap supracompetitive rents by restricting the beneficial forces of competition at the expense of customers or suppliers. At first sight, however, such powerful or dominant players do not seem to exist in professional sports. In contrast to ordinary goods markets, professional sports requires the existence of a sufficient number of competitors in order to produce the product at all (Rottenberg 1956; Neale 1964): a monopoly football club would obviously not be able to provide a marketable good. Thus, there is typically no worry of single-club dominance in this sense. However, sports competition also requires the definition, implementation and enforcement of sporting rules. This is typically the role of sports associations who govern and regulate the sports competition. Sports associations usually are private companies (sometimes non-for-profit companies) and, in football, membership associations with the members being lower-level sports associations and, at the bottom of the pyramid, the clubs who provide football teams on all...
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