Financial Fair Play and PSG and City.

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Post by Raptorgunner Fri Nov 09, 2012 8:51 pm

It has been reported in the last few days that Paris Saint-Germain (PSG) is close to agreeing a Eur100 million per season, four year sponsorship deal with a Qatari financial institution. Many questions have been asked about whether this is a blatant attempt at Financial Fair Play (FFP) circumvention. Others have applauded the ability of PSG to raise such a substantial sum. In order to dispel some myths about FFP spending, below is a quick guide to the FFP implications of the deal.

UEFA FFP

PSG do not need approval from UEFA to enter into any sponsorship agreement.
In order for PSG to break-even under the FFP requirements, they will submit financial information in time for the 2013-14 season. That information will include detailing such sponsorship deals.
UEFA will have the power to look into those deals at the time of the relevant FFP submissions.
Only if the deal is classified as a related party transaction (RPT) will UEFA be able to assess the fair value of the transaction. If it is not an RPT, UEFA cannot investigate further.
If it is a RPT, UEFA can assess the fair value for the transaction and amend the figure for FFP calculations accordingly.


The next question is what is a RPT, what does it mean and will it catch the PSG deal?

Related Party Transactions

In Annex X(E) of the FFP rules reference is made to “related party transactions and fair value of related party transactions”. The specific provisions of this rule are to ensure that owners of clubs are not able to artificially inflate a club’s revenues in order to bolster the chances of passing the FFP rules by providing the club with a massive sponsorship deal from one of the owner’s other companies. In many instances it could be particularly difficult to measure concepts of fair value for an asset or a discharged liability but UEFA is keen to ensure that few loopholes are available.

Annex X(E.7) states:

A related party transaction may, or may not, have taken place at fair value…An arrangement or a transaction is deemed to be ‘not transacted on an arm’s length basis’ if it has been entered into on terms more favourable to either party to the arrangement than would have been obtained if there had been no related party relationship.”

Manchester City comparison

It is helpful to use Manchester City as an example of how UEFA, come the 2013-14 season, will review the Etihad deal and assess, like they may do with PSG, whether the sponsorship deal is a RPT under the FFP rules. In relation to Man City’s reputed £400 million Etihad naming rights deal, the issue from UEFA’s perspective is three-fold.

First, UEFA will need to establish whether the sponsorship deal is a RPT. The Abu Dhabi government own Etihad Airways whose ruler Sheikh Khalifa is the half-brother of Manchester 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 Manchester 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’s 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 to 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 a £70 million 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 reduced to the level UEFA believe is appropriate.

My understanding is that any investigation into any potential RPT will only take place when all the information is requested from City, PSG and other clubs in time for UEFA to consider specific 2013-14 license applications (i.e. when the FFP rules actually kick-in and not before).

Conclusion

By using the Man City example, it can be demonstrated how UEFA will weigh up the potential PSG deal with the Qatari institution. As stated above, only when UEFA and the French national football association have looked closely at whether the deal may qualify as a RPT will an assessment of the practical RPT test become clearer. Before then, I am afraid, it remains something of a guessing game.

http://www.danielgeey.com/financial-fair-play-and-psg/
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Post by norton Fri Nov 09, 2012 10:24 pm

I think that both will get away with it. Once that happens, Juventus Stadium wil be renamed IVECO, FIAT, New Holland, CASE, Chrysler or Ferrari stadium for oodles of euros. The Agnellis control all of those companies.

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Post by baresi Sat Nov 10, 2012 1:10 am

norton wrote:I think that both will get away with it. Once that happens, Juventus Stadium wil be renamed IVECO, FIAT, New Holland, CASE, Chrysler or Ferrari stadium for oodles of euros. The Agnellis control all of those companies.
Or simply just call it Gaddafi Stadium
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Post by baresi Sat Nov 10, 2012 1:24 am

Anyway this is further proof that FFP is only to enhance money laundering, and an easier way to inject "dirty" money into the European (international) system.

One other thing I don't see FIFA mentioning here is benefit contradictions, for example there is a direct relation between the owners of Man City and Qatar Foundation sponsors of Barca.
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Post by chinomaster182 Sat Nov 10, 2012 3:04 am

norton wrote:I think that both will get away with it. Once that happens, Juventus Stadium wil be renamed IVECO, FIAT, New Holland, CASE, Chrysler or Ferrari stadium for oodles of euros. The Agnellis control all of those companies.

No, this is an exact violation of RPT annex that is described above, precisely because the Agnellis have control in these companies.

The City deal was not in violation because it was not demostrated that Sheikh Khalifa (owner of Etihad) was in control of Manchester City, even if he is the half brother of Sheikh Mansour its not a problem, City didn't get away with anything.

PSG probably won't be found guilty either unless the sponsors are somehow in the same organization as the Qatari owners and have some level of control in PSG. Yes, i did see that they're both from Qatar, that doesn't tell us much does it?

Can Juventus do the same trick? Of course, the Agnellis only have to have a billionaire buddy somewhere that has some kind of organization and is willing to give away hundreds of millions away in sponsorship, easy.

baresi wrote:Anyway this is further proof that FFP is only to enhance money laundering, and an easier way to inject "dirty" money into the European (international) system.

One other thing I don't see FIFA mentioning here is benefit contradictions, for example there is a direct relation between the owners of Man City and Qatar Foundation sponsors of Barca.

You really haven't thought this through have you? Whats better to launder millions, a benefactor model in which a sugar daddy just pumps in millions without anyone batting an eyelash, or a system in which a third party organization constantly has to look at your financial reports?

...

I also might be malinformed, but in what why does Sheikh Mansour, part of the ruling Abu Dhabi family in UAE, play a part in whatever the Qatar foundation does?
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Post by norton Sat Nov 10, 2012 4:25 am

The City deal was not in violation because it was not demostrated that Sheikh Khalifa (owner of Etihad) was in control of Manchester City, even if he is the half brother of Sheikh Mansour its not a problem,

Now do you really believe what you wrote? The Agnelli's can show that they are not in control just as these shiekhs can.

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Post by chinomaster182 Sat Nov 10, 2012 7:22 am

norton wrote:The City deal was not in violation because it was not demostrated that Sheikh Khalifa (owner of Etihad) was in control of Manchester City, even if he is the half brother of Sheikh Mansour its not a problem,

Now do you really believe what you wrote? The Agnelli's can show that they are not in control just as these shiekhs can.

Its not at all about what i believe, its about what you can legally prove in a court of law.

Now, as far as i know, Andrea Agnelli has interest and control in Juventus, FIAT and Exor, the other companies like Ferrari and Chrysler are part of the FIAT family. Both of these companies can't sponsor Juventus and not be counted as RPT because Andrea is a board member of both these companies.

Sheikh Mansour might be a bigshot in Etihad just because his half brother owns the company, but as far as we legally know, Mansour is not a board member of Etihad or an important share holder in that company.

But as i said, its not like Juventus and Andrea can't repeat the same trick. They would just have to find another billionaire that is his friend like say... The owner of Toyota (just to put an example), and have him put in hundreds of millions in sponsorship while expecting nothing in return, if he can do that then Juventus will be absolutely fine.
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Post by baresi Sat Nov 10, 2012 10:37 am

chinomaster182 wrote:
You really haven't thought this through have you? Whats better to launder millions, a benefactor model in which a sugar daddy just pumps in millions without anyone batting an eyelash, or a system in which a third party organization constantly has to look at your financial reports?

...

I also might be malinformed, but in what why does Sheikh Mansour, part of the ruling Abu Dhabi family in UAE, play a part in whatever the Qatar foundation does?

In the case of sugar daddy pumping millions can not be considered money laundering, it is more like a drug dealer buying a 7K SUV and pimping it with another 100K paying all cash, or going to strip clubs and blowing away 20k, it is more about spending dirty money, but he can't just go and buy an eight digit mansion, or establish a multi million company, on the other hand you have the drug lords those that are enjoying their money legally, and those are the ones involved in money laundering, and one of the basic ways that can't be stopped is very similar to what FFP is aiming towards.



The entire point of money laundering is to have an official third party at the end of the day to tell you, good job you are clean, go ahead and enjoy your money officially.

If interested I can write pages on the topic.
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