The Problem with Salary Caps Under European Union Law: The Case Against Financial Fair Play

Abstract

Salary caps have been part of U.S. professional sports for a long time. Salary caps can be designed in different ways and the term is used here broadly to include all measures that limit how much money a team can spend on player salaries. With the exception of three rugby leagues, salary caps do not exist in European professional sports. This will change in 2012 when UEFA’s recently revealed Financial Fair Play rules (FFP-rules) become applicable to all of European football. The FFP-rules contain a number of quite technical requirements but its core is the ”break-even requirement” according to which professional football clubs will be denied a UEFA competition license if their expenses exceeds their incomes. Unlike most current salary caps, the FFP-rules do not stipulate a fixed maximum payroll that is the same for all teams. Nevertheless, the rules still limit how much money a team can spend on player salaries. The paper will examine whether the FFP-rules are compatible with European Union law. The paper argues that the FFP–rules raise antitrust law issues as well as free movement issues. Consequently, the compatibility of the rules with European Union law turns on whether they can be justified. This, in turn, depends on whether it can be shown that they are proper and necessary to achieve an overriding interest. The paper concludes that this is highly questionable.

Keywords: sports law, competition law, EU law, free movement, anti-trust, fair play, football