Sportcal’s Theme Focus articles provide concise analysis into news stories that illustrate the key themes affecting the sports industry. Drawing on our Thematic Intelligence, they provide insights into the issues driving change across global sports.

The story

European soccer governing body UEFA last week (July 28) announced that English club Chelsea had been fined €10 million ($11 million) for breaching Financial Fair Play (FFP) rules between 2012 and 2019 when it was under previous ownership.

The club has separately been making efforts to comply with FFP rules since the end of its 2022-23 season in May, and elsewhere it will have to navigate UEFA’s multi-club ownership rules after its parent company bought France’s Racing Club Strasbourg for $81 million in June.

The background

The finances of the London club have been scrutinized ever since Russian billionaire Roman Abramovich bought the club in 2003. Allegations of corruption and links with Russian President Vladimir Putin resulted in Abramovich being sanctioned and effectively forced to sell the club, as Russia ramped up its invasion of Ukraine.

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In May 2022, BlueCo – a new consortium led by American businessman Todd Boehly and private investment firm Clearlake Capital – completed its takeover of the club in a $5.4 billion deal.

While steadying the ship, that deal and Chelsea’s subsequent transfer activity have also come under fire. The club has spent over £600 million ($760 million) on new signings since the takeover, handing out unusually long-term contracts to players to circumvent FFP by writing down the values over longer periods.

In response, UEFA changed its Club Licensing and Financial Sustainability Regulations from July 1, which will see the repayment of a player’s registration and transfer fee limited to five years to close that particular loophole. However, the new rule will not affect contracts that Chelsea has already struck.

Boehly’s talk of “continuously adding resources” and the “different countries where there are advantages to having a club,” meanwhile, has drawn attention to Chelsea’s plans for a multi-club model.

What it means

Although Chelsea’s recent sanction from UEFA is for filing incorrect financial information between 2012 and 2019 – when the club was owned by Abramovich – there has also been a recent tightening of regulation around the financial activity of multi-club ownership chains. UEFA’s Financial Sustainability Rules, for example, require all transactions, including transfers between clubs in the same ownership group, to be made at “fair value.” This will draw increased attention as the trend grows.

Chelsea have cut their significant wage bill and eased FFP concerns since May. The sales of Edouard Mendy, N’Golo Kante, and Kalidou Koulibaly to clubs financed by Saudi Arabia’s sovereign wealth Public Investment Fund (PIF) have raised £33 million in fees. It is unlikely to be a coincidence that the inescapable Saudi juggernaut is also a major investor in Clearlake Capital which owns 60% of Chelsea.

While UEFA confirmed it was approached by the Boehly-led consortium about the incomplete financial information, Jacob Kemp, analyst at GlobalData Sport, has pointed to a need for the club to appear to be playing ball.

“It appears Boehly has been proactive with UEFA, flagging the previous administration’s financial discrepancies, and this could be proof of clubs starting to take FFP much more seriously,” he says. “Boehly is effectively washing his hands of any responsibility over the missing information and crafting a more preferential personal appearance of his ownership tenure to UEFA. By pre-empting the problem, Boehly is coaxing UEFA into being more lenient, handing the club a €10-million fine for these rules breaks earlier in July 2023.”

A transparent relationship with UEFA will make life easier for Chelsea’s owners as they embark on their multi-club ownership journey.

Earlier in July, UEFA introduced new regulations against multi-club models – the most notable being the prohibition of player transfers (and loan deals) between clubs until September 2024. These were targeted at a range of clubs, including V Sports’ Aston Villa (UK) and Vitoria Sport Clube (Portugal), and RedBird Capital’s AC Milan (Italy) and Toulouse (France), although UEFA subsequently cleared these multi-club teams to play in the upcoming season’s European competitions.

Multi-club ownership is an enticing structure for owners and investors in several ways. It improves the commercial appeal to prospective brand partners, with potential deals no longer limited to one league, market, country, or continent.

“Many clubs with shared owners have adopted a player pathway model, whereby players can be fed through the different teams, ultimately aiding the talent emergence for the biggest teams in the group,” says Kemp. “A prime example in recent seasons has been the transfer of players such as Dayot Upamecano, Dominik Szoboszlai, and Naby Keita between the Red Bull-owned clubs, RB Salzburg and RB Leipzig. Another significant appeal for multi-club ownership is the reduced financial threat, with a potential relegation of one club softened by the success of other owned clubs.”

The growing trend has been peppered with ethical questions – above all, how two teams owned by the same company can compete against each other. Stricter regulation on owning two or more teams from the same domestic league means this practice is most likely to be encountered in transnational European competitions.

Resource monopolization by larger teams is also already a major point of contention in soccer leagues internationally, seen in the backlash over the breakaway European Super League in 2021.

Clubs at the forefront of ownership chains – such as Manchester City, situated at the pinnacle of City Football Group’s (CFG) 13-team chain – may benefit from disproportionately stratified funding. According to Kemp, “While there are benefits for smaller clubs in being part of a bigger ownership club chain, there could be a feeling of devaluation, where their efforts and ambition are limited because of greater attention and funding being attributed to bigger clubs in the chain.”

Kemp also points to “the fear of supporting the growing trend around sportswashing, whereby club owners start to wield too much influence and power over the sport.” As multi-club chains like the established CFG and upcoming BlueCo overlap with the wider issue of Saudi human rights violations and sportswashing, regulation will have to be proportionately firm and adaptable to keep up with ever-complexifying developments.

Indeed, following their alleged FFP violations between 2009 and 2018, the punishment given to Manchester City and the wider CFG could become the ruling which defines the narrative moving forward.

Further reading

City Football Group

BlueCo acquisition of RC Strasbourg

Multi-club ownership: the roots, opportunities, and challenges of the accelerating trend

UEFA ruling on Juventus and Chelsea