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Is Bayern Munich's FFP Plan Truly Promoting Fair Play?
June 12, 2015
On Thursday, Bild reported that the executive board of the German Football League (DFL) held a special meeting to resolve some issues regarding financial fair play (FFP).
The assembly was said to have been at the request of Bayern Munich and adjourned with the decision to form a commission to deal with all FFP-related issues. The exact composition of this commission is as yet unknown, but it is reported that at least one representative of the German champions will be involved.
The meeting was said to have been called as a reaction to certain challenges against UEFA's FFP rules. The European football governing body is in the midst of determining how to deal with the issue of "fair" value with regard to sponsorship, and it is the aim of the DFL commission to independently draw its own conclusions on the topic.
UEFA's version of FFP requires that all clubs avoid significant losses and have a business model that would be sustainable in the absence of a rich owner capable of footing the bill for any deficits. A way around this is for clubs to reach sponsorship deals with companies owned by or affiliated with their owners. A major concern is that such deals can simply be a case of the right hand passing money to the left, with a club receiving ostensible sponsorship well beyond "fair" market value.
Paris Saint-Germain, owned by Qatar Sports Investments, turned heads when they announced a sponsorship deal with the Qatar Tourism Authority that will reach €200 million annually by 2016, analyzed by the Telegraph's Mark Ogden. In May 2014, per BBC Sport, UEFA deemed that deal a "related party transaction" and judged it to be in violation of its FFP rules. Now, the DFL will aim to make its own conclusions regarding questionable sponsorship.
The other issue the DFL commission will investigate is ownership. Current regulations in German football require fans (members) to be the majority owners of clubs. The 50+1 rule, as it's known, has existed for almost 15 years and is beginning to crumble.
As "factory clubs," Wolfsburg and Leverkusen were exempt from the rule thanks to the inclusion of a clause that allowed an individual entity to own a majority share if their relationship had existed for 20 years or more.
Later, software entrepreneur Dietmar Hopp funded his hometown club of Hoffenheim—despite not having a majority stake—enabling the village side to rapidly rise from the fifth division to the Bundesliga. The billionaire gained a majority share of the club in February, reported by the Associated Press (h/t ESPN FC), because he has held a financial relationship with Hoffenheim for 25 years.
Most inventive in tearing down the 50+1 rule have been RB Leipzig, formerly SSV Markranstadt, who were purchased by Red Bull and cleverly changed the club's name to make one think of the ownership while actually being officially named Rasen Ballsport (lawn ball sport) in compliance with regulations that prohibit clubs from being named after companies.
To consolidate an effective majority, Leipzig have limited ownership to 11 members, all employees of Red Bull, with the club having the authority to reject membership requests from outsiders.
Leipzig failed to achieve promotion to the Bundesliga in 2014-15, but they have since signed young talents Davie Selke and Willi Orban in an effort to catalyze their ascent to the top. After spending over €23 million on transfers the previous year, per Transfermarkt, Die Bullen are apparently fully backed by Red Bull. The energy drinks company could, in time, make their pet project into the Bundesliga's very own PSG.
It is no coincidence that Bayern were the club to call for review of the DFL's licensing requirements. Nor is it any mystery why they would do so: After decades of consolidating seemingly insurmountable financial and sporting dominance in the Bundesliga, they could conceivably be challenged in the coming years.
It would take a long time, but even the ultra-rich Bayern could one day face major obstacles if the likes of Leipzig are allowed to maintain their current course. At the very least, it reframes the entire concept of business in the Bundesliga and requires Bayern to compete on terms outside those they have dominated for so long.
Quite simply, a free model of business makes snapping up talent from around the Bundesliga substantially harder for Bayern if rival clubs are not limited by natural income and instead have the resources of major international corporations at their disposal.
The question now is, would hindrances to the growth of clubs such as Leipzig, Hoffenheim, Wolfsburg and Leverkusen truly promote fair play? Or would they only inhibit competition and help maintain the status quo?
Every football club with aspirations has natural obstacles to overcome, and some have natural advantages. Those looking to make a name for themselves now find it much more difficult than "traditional" sides because the latter were able to develop their dominance before facing any superpowers.
Real Madrid, for example, won the first five European Cups during a period in which competition was scarce. They've since used that success to build a reputation and worldwide brand.
Similarly, Bayern used early results to forge long-term success. When the Bundesliga was first created in 1963, they were at something of a disadvantage. They weren't part of the German top flight in its first season, but they soon became Germany's biggest and most successful club. Gerd Muller was signed in 1964, joining the team in the same year Franz Beckenbauer was promoted to the first team. These legends would catalyze Bayern's rise to the top, and 12 years later, they rounded off their third consecutive European Cup trophy.
In their history, Bayern have used their natural advantages effectively enough to consistently maintain their position atop the German football hierarchy. Munich is Germany's richest city, making commercial revenue and attendance relatively easy to accumulate. And located 170 kilometers from the nearest traditional Bundesliga club, Nurnberg, Bayern have a bigger talent pool to choose from.
That's how "locals" such as Bastian Schweinsteiger, Thomas Muller and Holger Badstuber, each born 50 to 115 kilometers away from Munich, were always destined to play for Bayern. For perspective, the 110 kilometer drive from Dortmund to Cologne passes half a dozen other "traditional" clubs. Fine lines divide Cologne, Leverkusen, Dusseldorf, Essen, Duisburg, Bochum, Gelsenkirchen and Dortmund.
There's nothing wrong with Bayern using their natural advantages. But to begrudge other clubs doing the same is a bit hypocritical. Wolfsburg's natural disadvantage is being based in a rather small city with neither the riches of Munich nor the allure of Berlin. It happens to be home of Volkswagen's headquarters.
Why should Wolfsburg not be allowed to take full advantage of all the automobile giant has to offer as owners and sponsors? After all, Bayern themselves have taken advantage of sponsors Allianz being based in Munich, as well as fellow sponsors and part-owners Adidas and Audi both having headquarters in Bavaria. "Excess" is in the eye of the beholder, and according to any Bayern executive, that could easily be defined as anything more than the German record champions are able to secure.
Hannover president Martin Kind, who lobbied against the 50+1 rule in 2010, might have another perspective. At this point, any chances of the Lower Saxony side becoming competitive in the long term are slim to nonexistent. Whereas Bayern started from a more or less neutral foothold before the Bundesliga was the institution it has become, aspiring clubs nowadays have pre-formed financial and sporting giants to compete with.
In the absence of a truly extreme external influx of cash to secure long-term commitments from star players, it is inevitable that any side rising to challenge the status quo in Germany will be picked apart by Bayern and foreign powers.
On the opposite side of the coin, the precious culture of the Bundesliga is slowly eroding, and it's understandable that Bayern are not acting entirely out of self-interest.
There is no doubt that the Bundesliga's record champions wouldn't hesitate to crush 1860 Munich if their local neighbors were ever to contest their dominance, but for now, cash-strapped 1860 play for free at the Allianz. Bayern similarly helped bail out Duisburg last July by playing a friendly, the proceeds of which went to aid the Ruhr side. Even if they won't let it get in the way of their success, tradition and culture mean something to Bayern.
As more and more "artificial" clubs rise to the first division of the Bundesliga, they displace traditional sides. Wolfsburg are one of the league's least appreciated clubs, and Leverkusen's attendance has always been no more than two thirds of that which Cologne have historically received, even when Die Geissbocke were in the second division. Now, it seems Hoffenheim are a permanent fixture in the first division and Leipzig are on their way.
Meanwhile, Dusseldorf, Kaiserslautern and Nurnberg all attract near-capacity crowds in stadiums of approximately 50,000 capacity or more, yet do so while playing in the second tier. As more and more "plastic" clubs rise, they displace an increasing number of traditional, more loved teams. Although some clubs manage to maintain their culture and stay afloat in the 2. Bundesliga, one needs only to look at struggling Duisburg and Bochum to see how a prolonged stay in the second tier could be the beginning of the end.
One solution would be to expand the Bundesliga to 20 teams, like many other European leagues, and either do away with the traditional winter break or lessen it and prolong the season on either or both sides of the summer break. But that could also involve eroding the league's culture.
This discussion and that which the DFL's commission may have could soon become purely academic in any case, as financial fair play in any sense could well be judged to violate EU competition law—more on this topic from B/R's Duncan Castles—which would perhaps force the Bundesliga's clubs to adopt a more laissez-faire approach to business. In that case, not even Bayern's millions could stop the rise of nouveau-riche challengers to the German top flight, for better or for worse.