Milan’s complicated relationship with Financial Fair Play: Background, implications and loopholes

By Rohit Rajeev -

Financial Fair Play has been prevalent in football since the last decade, and it is something which has huge implications on the transfer market, especially for clubs like Milan.

Given its importance, decoding what FFP means in simple terms and how it is affecting Milan and Italian Serie A as a whole seems relevant, especially with the Rossoneri facing such a crucial summer of recruitment.

Background

The bosses at UEFA decided that they needed clubs to curb spending more than what it was earning and going into debt and eventually becoming insolvent like how Lazio and Parma did. Their idea was the Financial Fair Play rule.

So what does FFP entail? The basic idea of FFP is to break-even, which means that the expenditure of the club should match the income of the club within the assessment year (all clubs are assessed over a period of three years). Milan are being assessed from July 2019 to June 2022 after they decided to sit out of the Europa League in 2019-20, something which functioned as almost a reset button.

The rules allow the clubs to spend up to €5m more than what they earn. If the clubs have owners who are willing to absorb the losses of the club then UEFA allows the team to spend up to €30m more than the income.

UEFA have listed transfer fees, wages, amortisations and dividends paid as expenses. That is all of these expenses have to equal to what a club earns in the assessment period, hence why Milan have been scrambling to sell players and reduce the wage bill.

Expenditure on stadium, youth teams and women’s football has been excluded from FFP calculations to promote investments into the respective fields. The items listed as Income are prize money, sponsorship, match day income (ticket sales plus stadium revenue) and player sales.

Are owners not allowed to invest into their club? Owners can invest into the club but if the investment exceeds 30% the revenue of the club then the break-even calculation would get reset.

What it means for Milan

So why are Milan in trouble? Simply put, they don’t earn enough money. Milan were top of the money league with Manchester United and Madrid in 2003 but now have slipped down to below 21st rank thanks to a combination of bad results and not searching for new avenues of investment.

The fact that Milan have accumulated €735m losses in seven years itself shows how bad thing had gotten. Years of neglect under Silvio Berlusconi and then the Chinese ownership trying to shortcut to success caused damage, then the current owners Elliott Management put their trust in the wrong man in Leonardo.

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The €250m spent by Yonghong Li’s group when Milan were in huge losses after the Berlusconi era attracted the attention of UEFA’s Club Financial Control Body (CFCB) and while Milan were sanctioned with a one-year ban from Europe, Elliott saved the club with a promise to adhere to the rules of FFP.

Hence, with tight restrictions and investment into scouting in the form of Heinrik Almstadt and Geoffrey Moncada, Milan are trying to emulate the Liverpool model where a blend of experience and youth under financial parameters leads to success.

Loopholes in FPP

Whenever FFP is mentioned, fans often say how UEFA are always lenient towards clubs like Manchester City, PSG, and Barcelona. This is because these clubs (with the help of UEFA) have found the loopholes in the system.

For example, sponsorship by the ownership is allowed by UEFA up to 30% but how this 30% is calculated is not clearly mentioned by UEFA, giving a free pass to wealthy owners. A similar approach is taken with the amount of debt allowed for each club by UEFA, who take into account net debt, that is money to be paid minus money to be received.

FFP also has a huge loophole in terms of them not taking into account the disparity in income of clubs. For example, Sheffield United – a team that got relegated from the Premier League – earned €106m in TV money while Inter got only €65m in a season they won the Scudetto.

This would lead to different break even calculation for the teams and no merit to Inter or Bayern, who won the Bundesliga, while teams like Manchester City who won the Premier League got €200m alone from TV money.

It is this loose interpretation of rules that drew the ire of the teams who decided to form the break-away Super League, all because they wanted to reduce the disparity in incomes of each teams as the debt keeps mounting for teams like Madrid and Barcelona.

Future for Milan

Maldini – in an interview with SoFoot – revealed that in his opinion Milan need to be constant presence in the Champions League for the next four or five seasons for the club to be financially independent.

With Champions League football secured, the management needs to make investments while respecting financial parameters. It will be extremely challenging for the Rossoneri and their supporters to see their targets snatched up by bigger teams who have more financial power, but that is the result of years of mediocrity.


READ MORE: Exploits of Locatelli and Calhanoglu teach Milan two valuable lessons

Tags AC Milan

7 Comments

  1. Idris says:

    It means milan owner elliote have the money but ffp rule violeted before they took charges is what they r try to stay within the parameter set by uefa. I guess we as fan need know the income the make and our limit of spending so as not to expect much in term of the management

  2. Joe101 says:

    I said it millions of times before
    FFP was good in principle, but then a 5 yo ADHD kid took charge of it and it all went to shits

  3. Inertia says:

    Super League now sounds so much better.

    1. Joe101 says:

      it always did
      but idiots that had no clue about it decided to come out and protest and UEFA couldn’t have hoped for a better and softer toilet paper to wipe their arses with

  4. Rodger says:

    Ultimately I believe FFP is a good thing. Clubs shouldn’t be racking up enormous debts. PSG and Man City find loopholes and workarounds, but ultimately those clubs aren’t going into debt and thus the initial purpose is in place.

    Covid will likely be a minor blessing for Milan in FFP terms – yes it cost income but UEFA will basically have to write off the year that it affected as ‘exceptional circumstances’.

    And your Sheffield Utd example is a good one; even in the Championship next year, their ‘parachute payments’ will mean they make similar TV income to Milan (actually a bit less once Champions League is factored in) and any new Premiership teams benefit from this. Milan no longer compete with Manchester United and Chelsea for signings, now even mid-table England teams can outbid the top Italian ones.

    But this also gives an opportunity and a market. Milan’s biggest weakness compared to other ‘Super League’ clubs is the complete lack of income from selling players. The ‘buy low sell high’ model is critical for success in the FFP era, it’s how clubs like Chelsea can break even whilst spending extortionate amounts. This is the area Milan need to improve in; training up young players and selling them to other teams. Admittedly, Italian teams don’t have the money… maybe they need to start looking at young British players to bring into the academy, knowing they can be sold back to England at a premium.

  5. Juro says:

    Great article. No surprise UEFA is corrupt. “For example, sponsorship by the ownership is allowed by UEFA up to 30% but how this 30% is calculated is not clearly mentioned by UEFA, giving a free pass to wealthy owners. A similar approach is taken with the amount of debt allowed for each club by UEFA, who take into account net debt, that is money to be paid minus money to be received.” Man City and PSG owners just have the club sign 100M + sponsorship deals with the airlines they own (El Ethiad, Qatar) and call it “revenue” lol. What a joke. if UEFA really wants parity and fairness in the game they will close these “loopholes” and make it fair for all teams. Otherwise it’s just BS where the rich get richer. No coincidence the top 4 spending clubs were in the CL finals this year…

  6. Caleb says:

    F… Uefa …they are the once killing game..they allow clubs like man City, psg to spend billions from their middle East money and they trouble the club’s who are trying to earn money by playing more tournaments..and dumb fans who go to protest..how the f… They think club should make the money to pay to the greedy agent and fans and money hungry uefa fines…

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