(Football news) A temporary ban has come into effect, voted by 18 Premier League clubs as concerns grow over commercial and sponsorship deals linked with businesses that have links with the clubs owners. An emergency meeting was held by Premier League clubs after Newcastle United’s takeover by Saudi backed Public Investment Fund (PIF) was approved as concerns were raised that the new owners could sign lucrative deals with state-owned companies.
A similar situation occurred when Sheikh Mansour purchased Manchester City in September 2008 and signed lucrative partnerships with Etihad Airways to rename the Manchester City stadium ‘Etihad Stadium’, thereby circumnavigating the Financial Fair Play regulations as the deal was shown as a revenue for the club. Sheikh Mansour is the deputy Prime Minister of the United Arab Emirates and Etihad Airways is owned by the Government of Abu Dhabi, a classic example of a new owner signing a commercial/sponsorship deal with a state-owned company. Other notable clubs in the Premier League that have signed similar agreements is Leicester’s deal to rename their home venue to King Power Stadium and Everton’s sponsorship of USM Finch Farm.
Ironically, Newcastle United voted against the temporary ban while Manchester City abstained after their lawyers advised that the vote was unlawful. According to the Premier League’s financial fair play regulations, clubs can make a maximum losses of £105m over a rolling three-year period. Commercial deals with links to the owner would allow clubs to spend more than their approved limit, thereby getting an unfair competitive advantage in the league.
While the temporary freeze is in place, talks are being held for a permanent rule change with one Premier League executive saying “"If we didn't have the ban, there would have been nothing to stop Newcastle signing, say a £100m naming rights deal for their stadium with a Saudi company linked to their owners. They could then have used that money to buy players in January and get around our financial fair play rules.”
All deals that involve a “related party investment” are subject to a market value test to ensure that the value of the deal is not artificially inflated, which would be in breach of the Premier League rules. In the next shareholder’s meeting in November, the working party will get back to the 20 Premier League clubs to discuss the matter further with an aim to make financial regulations more watertight and become a permanent addition in the Premier League rules.