Self-Interested Premier League Action Against Manchester City Proves Need For Regulation

As demonstrations of self-regulation go the Premier League’s decision to hit current title holders Manchester City with 100 charges was a bold statement of intent.

So grand some wondered if the gesture was a tad performative.

“Amazing coincidence that the Premier League, which is lobbying against an independent regulator of football, charges Manchester City for breach of financial rules 24 hours before the government releases the white paper on football governance reform,” wrote University of Liverpool soccer finance expert Kieran Maguire on Twitter.

An announcement about British politicians’ attempts to create a body to oversee a sport the nation claims to have invented has been in the works for years now.

Amidst the tumult and polarisation engulfing politics across the Isles for the past 12 months, it’s been one of the few areas where there is a consensus.

There is one pretty glaring exception to the majority in favor of a regulatory overhaul; the clubs, or perhaps to be more specific, the owners.

In the past decade, the English Premier League has become ‘English’ in name only, the vast majority of the teams are owned by foreign investors, and it is an international competition filled with stars from around the world.

Part of the reason billionaires flock to buy these teams is the lack of rules around who can own a club or what they can do with it.

Like a marina in Monaco or a bank account in the Cayman Islands, if you have the money to buy a hundred-year-old English establishment it’s almost a point of principle that questions won’t be asked about the source of your income or what you intend to do with it.

Takeovers were approved for a Russian oligarch at Chelsea, a Thai duty-free entrepreneur at Leicester City, the Chinese consortium buying Wolverhampton Wanderers and, of course, a Sheik acquiring Manchester City.

Another group whose taste in English soccer clubs grew exponentially in the past decade was American venture capitalists.

With a background in regulation-heavy US sports, these newcomers licked their lips at the commercial opportunities the light touch afforded them.

Unrestricted by the collective sponsorship deals the NFL or NBA strikes for its clubs, Manchester United owners the Glazers were the first to blaze a trail signing endorsement deals with companies around the world.

From ‘official tractor partners’ to tie-ups with noodle brands and pillow manufacturers, it felt like there was nothing you couldn’t slap a Red Devil crest on for the right price.

But it was hard to argue with the revenue these deals generated, despite declining fortunes on the field when the investor call came around it was always good news for the United shareholders.

The success of the Glazer’s wealth generation operation in Manchester surely influenced American takeovers at Arsenal, Liverpool, Aston Villa and, most recently, Chelsea where LA Dodgers co-owner Todd Boehly still saw big opportunities nearly two decades since United changed hands.

“There is an opportunity to capture some of that American mentality into English sports and really develop,” he said not long after taking control.

The English wake up?

A potential obstacle for these growth-hungry US investors would be if the English authorities awake from their slumber and try to regain some semblance of control over its most famous assets.

Not that the regulatory changes intend to limit foreign investment in UK sports.

As I pointed out at the time, although the rhetoric in the proposals was tough the British government’s enthusiastic support of the Saudi Arabian Public Investment Fund takeover of Newcastle United demonstrated it wasn’t about to block these types of deals.

Again, the people who had the most concern about the Newcastle buyout were rival clubs who feared a new competitor driving up costs by offering higher wages and bigger transfer fees.

This is essentially what the 100 charges against Manchester City boil down to, the accusation its rise to the top came by investing more than what was ‘fair.’

This argument is valid, as the Citizen’s rise contributed to clubs spending more than they can afford.

However, especially when clubs that already have a financial advantage over the rest of the division are involved, it is impossible to disassociate such intentions from self-interest.

Then there is the fact that history has repeatedly shown the greatest existential threats in English soccer do not relate to wage inflation at the very top.

No top-flight club has gone bust and though there have been a couple of examples of teams like Leeds United who’ve run into financial difficulty, the riches at the top of the game has inevitably made them saveable.

The danger lies further down the pyramid, a place where the Premier League seems to care far less about.

As I mentioned last week, competition is being distorted horrendously by the parachute payments-funds paid to relegated clubs by the top division to soften the blow of relegation-and has been for years.

It is effectively destroying competition in the lower divisions and increasing the polarization which inevitably leads to clubs at the bottom going bankrupt.

More equitable distribution of the vast wealth further down would help solve this issue, but there is little will from the clubs to do so. Why? Because it’s not in the interests of Premier League clubs to remove an anti-competitive safety net.

This is clear evidence the game cannot be trusted to look out for the interests of those at the bottom, which is supposedly what the government would like.

Going after Manchester City is not a demonstration it can regulate itself, it is the clubs at the top of the division acting in their self-interest.

Good regulation both enhances competition and increases sustainability, currently, the Premier League is doing neither so an independent body can’t come soon enough.