I have an article in The Times today about the anti-competitive implications of Financial Fair Play, which was prompted by Martin Samuel’s broadside in the Daily Mail. My article is based on a new paper (Peeters & Szymanski Financial Fair Play WP) which I have been working on with Thomas Peeters from the University of Antwerp. In the paper we simulate the impact of FFP as if the rules had applied in the 2009/10 season. To work this out we estimate the effect of spending on success, not over the whole season (like the chart in Soccernomics) but on a game by game basis- i.e. we treat the result of each game as a function of the wage spending of each team. We used a sample of over 20,000 games over 20 years for the top three English divisions. Our results then enabled to estimate how much teams would spend if they had not been allowed to exceed the FFP break-even constraint in 2009/10.
I should say that I was genuinely surprised by the results. Relatively few teams breached breakeven by much even then, so I expected a relatively small fall in expenditure. Instead, the reductions made by a few teams had a big knock-on effect on the remaining teams, who need to spend less to achieve the same level of success, such that overall wage spending would have been up to 23% lower than it actually was had the full FFP regime been in operation.
Another way to put this is that FFP works as a coordination device which enable clubs to cut spending simultaneously and hence increase profitability. If the Premier League voted to implement FFP I think this would then be a breach of Chapter One of the Competition Act, which prohibits agreements that “limit or control production, markets, technical development or investment”. To be sure, lawyers for the Premier League and the clubs would claim that the FFP rules have pro-competitive effects.
I’m not sure I can see what these might be. It certainly would do nothing to improve competitive balance among the teams, and to be fair to UEFA they do not even claim that it would. In our simulations the variance of points won in the Premier League is unaffected by FFP.