Manchester City are launching legal action against the Premier League over the organisation’s associated party transaction (APT) rules concerning commercial deals.
On Tuesday, The Times reported that Man City and the Premier League are due to face off in a legal battle regarding whether APT rules on sponsorship deals are financially ‘fair’. An arbitration hearing scheduled between June 10-21.
City are the dominant side in the top flight in recent years, having won the last four League titles in a row – and six of the last seven. Yet the club is unhappy following a vote in February taken at a League shareholder meeting to tighten the restrictions around APT rules.
City’s latest grievance stands separate to the 115 charges of alleged breaches of financial rules the club is still facing, with an independent commission on those charges scheduled to take place later in 2024; potentially November. However, should City successfully challenge the Premier League’s ATP rules, it could have a bearing on future sponsorship deals as well as the validity of some of the 115 charges City are facing.
With City and the Premier League set to face off in an extraordinary legal case, football.london writers have offered their verdicts on the situation…
Dave Powell
There is the temptation to link the Man City legal action with the 115 charges that they face from the Premier League. But from City’s perspective this fresh legal action is about the new associated party transaction rules around fair market value that were introduced back in February. City have produced record revenues for the most recently published financial year, a staggering £713m, during a season where they won the Premier League, FA Cup, and the lucrative Champions League for the very first time. Commercial revenue accounted for £341.4m of that sum.
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The new rules that were voted through by a majority of 14 member clubs in February were aimed at reducing the reliance on commercial revenues related to club ownership, with the rules tightened. Back in December 2021, the Premier League’s member clubs convened to pass new rules in the wake of Newcastle United’s takeover by the Saudi Arabian Public Investment Fund due to concerns from some clubs that they would lean on the simpatico relationships they had in the Middle East to raise commercial revenues to allow greater spend on transfers and wages.
But with new financial controls coming down the tracks in the form of a squad cost ratio rule, and salary caps to be introduced as a backstop financial control, the new rules around fair market value of associated party transactions are being challenged by City through their legal case with the Premier League, sparking something of a civil war. City have made their position clear with the legal case, branding it ‘unlawful’ and claiming that they contravene UK competition law.
The challenge, which cannot be appealed after the decision of the arbitration hearing is made later this month, isn’t baseless given UK competition law, but the likelihood of success isn’t high. But City will be hoping that they can make a compelling case for the newly-adopted rules to be changed, believing that they are solely designed to stop the growth of clubs such as themselves and Newcastle.
If successful, while unlikely to have any bearing on the 115 charges City face and the case being made, it could change the longer-term dynamics around competitive balance. Part of the defence is likely to be that more and more layers of control to curb spending and revenue growth of the biggest clubs could be to the detriment of the Premier League as a global product in years to come, with it being less appealing to some investors from areas such as the Middle East, who won’t be able to put capital to work in the way that they would want to.
For North American ownership groups and private equity funds from the area, who like greater control and security around cost, given the volume of US owners in the Premier League it isn’t surprising that many voted these new rules in.
Tom Coley
City are going to war with the Premier League and they are taking everyone with them. The repercussions of both cases (115 charges and associated party transactions) against the establishment will be seismic either way.
In one sense they appear to be fighting back at a time whereby how the League is run is more and more under scrutiny. Newcastle, for example, are just one team that would surely benefit if the APT legal battle was ruled as being in breach of UK competition law.
An environment that has more lenient APT rules (if any at all) could look quite dystopian. There is more emphasis placed on commercial revenue than ever before due to the impact of overstepping the mark and allowing clubs to go above and beyond the line would be risky business for the Premier League.
There are then questions to be asked over how this will play into the new financial restriction-laid system in England anyway. Squad cost measures, anchoring, and price caps could yet all still have their role to play. What City are doing is not necessarily going to open everything up in deregulation, but leave the door open to a new world of even greater uncertainties.
None of this is good for the actual spectacle of club football. The more the game is played in court rooms and in legal cases the less it captures the same imagination that most people love it for. The murky backdrops, asterisk conversations, and extremely serious legal matters are a distraction that is both needed and unneeded. It feels like there’s no way of reversing this process.
Jack Flintham
Not for the first time this season we find ourselves in dangerous times for football. The decision by City to take legal action against the Premier League does not sit well with me nor should it with anyone else.
This season, the Premier League has been dictated more by what has happened with lawyers than footballers and that must end. It is fair to say that the Premier League is by no means the perfect organisation and should be held to task a lot more than it has been for decisions.
But, attacking them on the grounds of associated party transactions feels ill-advised. It is clear why City are doing this. They would heavily benefit from a relaxation of these rules but suing the Premier League for damages seems an over-reaction and causes unnecessary drama.
We are on the verge of a civil war in the Premier League which is bound to end messily and change the way football is received for years to come in this country. The only victors in all of this are the fans of clubs outside of the Premier League – no matter how bad things get for them, at least they know it will never reach this level.
Mark Wakefield
Whatever the outcome of Man City’s legal battle with the Premier League, it’s not a good look for football.
I’m old enough to see how money has gradually had more of an impact on the way the sport is run over the last two decades. It makes sense that it would eventually reach a tipping point, and this latest update feels like it might be just that.
What makes City’s legal challenge rather interesting is that, if reports are to be believed, they have the support of some other clubs in the Premier League. One club having a disagreement with the League is one thing, but when multiple clubs start voicing their concerns then it becomes a real problem.
Of course, it remains to be seen what the outcome of Man City’s legal challenge will be. Regardless of what happens, it’s safe to assume that things won’t quite be the same.
Isaac Johnson
There are several legalities around the case that mean it’s difficult to comment on specifics of the claims of APT rules being unlawful or discriminatory but it’s clear that the outcome could be seismic.
If Manchester City win the case then it would allow clubs to agree deals with entities connected to their owner without oversight – meaning that agreement fees could be inflated above market rates, thereby allowing clubs more headspace within spending rules.
Not only would this be anti-competitive, but it would widen the gap between the ‘big six’ and the others, making it near impossible for lower-ranked clubs to bridge the gap. It really is that serious, and would only fuel more support for the imperfect but consequently needed independent regulator.
