Manchester City Sponsorship Deals could be a ‘mockery of financial fair play’ says Wenger

By Community | September 23, 2012

Arsenal boss Arsene Wenger has suggested Manchester City sponsorship deals have made a ‘mockery of financial fair play’. 

City, owned by Sheikh Mansour, and Paris St Germain have been criticised for massive sponsorship deals with companies enjoying close links to their billionaire backers.

Etihad Airways have a 10-year agreement with City bringing in close to £400million with many believing they have deliberately paid above the market price to pump money into the club.

Arsenal boss Wenger, whose side drew with City 1-1, said: “If the sponsorship deals are just a way of getting round financial fair play then it’s not financial fair play.

“It makes the system worse for me, as that would mean it makes a mockery of financial fair play.

“Originally, for financial fair play, sponsorship deals had to be at the level of the market price and I don’t know whether they will work or not.

“But what City do off the pitch, we’ve spoken about many times.

“On the pitch, they are an advert for football that’s always good to see.”

Daniel Geey, a sports law specialist from Field Fisher Waterhouse suggested how Manchester City’s sponsorship will be assessed by UEFA.

He said: “First, UEFA will need to establish whether the sponsorship deal is a Related Party Transactions. The Abu Dhabi government own Etihad Airways whose ruler Sheikh Khalifa is the half-brother of Man City owner Sheikh Mansour. In order for the deal to be caught under the UEFA RPT provisions, it would probably need to be demonstrated that Sheikh Khalifa had some type of influence or control over Man City (see Annex X(E) paragraphs 3-4). If the agreement is not a RPT, UEFA will not look at the value of the deal in any more detail.

“Second, if the Etihad deal is deemed to be a RPT, UEFA will be faced with an interesting issue of how to divide the deal revenues between the shirt sponsorship, the stadium naming rights deal and the Etihad Campus development. A type of benchmarking exercise will need to be carried out to assess what UEFA considers will be “fair value.” If UEFA considers the deal has been at a fair value, that will be the end of the matter. Therefore UEFA will need to assess the counter-factual position should question marks be raised over a particular transaction. The devil is obviously in the detail but issues over how revenue can be correctly valued may become a particularly thorny issue. In order to investigate a shirt sponsorship deal to assess fair value it would be necessary for UEFA to use comparators to identify whether a particular deal is extraordinary in any particular way.

“In using a rather blunt example, should an entity with a relationship to Premier League club X who has Champions League aspirations enter into £70m per season in shirt sponsorship deal with Club X, UEFA may study the top shirt deals in the Premier League and throughout Europe to see the current market rates. Remember also that ‘market value’ will be different to UEFA’s ‘fair value’ test.

“Lastly, if UEFA concludes a deal has not been at a fair value, the revenue for the benefit of calculating a club’s FFP licence application would be reducedto the level UEFA believe is appropriate.”

Ben Wells, the former head of marketing at Chelsea, added: “It’s a tough call for Platini. FFP is founded on good ethical principles – even though there are those that point to the fact that leading clubs will use it to maintain the status quo – as I can’t see football clubs ever getting their own houses in order without an initiative like this.

“The City deal with Etihad is not the only one that UEFA need to look at. There are several out there which are in my view grossly overinflated in terms of return. The response from UEFA to this is crucial. If UEFA don’t display a decisive response then FFP runs the risk of being stillborn.”