State Aid for City?
An interesting conversation on Twitter this afternoon with Andrew Ward (@ARWardMadrid) prompted me to think about whether Manchester City FC might be considered to have received State Aid.
Our conversation was prompted by media reports that a number of European football clubs are being investigated by the EU Commission under the State Aid rules. Andrew’s interest was no doubt spurred by the inclusion of Real Madrid among those being investigated in relation to a parcel of land sold to them by local government. Could City’s relationship with Manchester City Council also lead to similar concerns?
The particular deal which raises questions is one in which MCFC paid Manchester City Council £2m for the naming rights to Eastlands Stadium. MCFC then used that facility to secure a controversial deal with their primary sponsors worth an estimated £35m a year for 10 years. Not all of that money is associated with the naming rights, but it must be a significant component. Is the £2m recompense to the Council sufficient reward, or are the Council ‘giving away’ an asset and in effect offering financial support to the club?
The relevant test under EU State Aid rules is whether the Council acted as a ‘Market Investor’ in relation to the deal. The Market Investor Principle does not mean that then council has to secure the maximum return possible, but they must take a position which will bring them a decent return in the medium term. Of course I don’t know any of the detail of the deal but it does seem questionable that the Council only secured a one-off payment of £2m where MCFC were in a position to negotiate so much more. I agree with Andrew that this situation looks as questionable as that involving Real Madrid.
The naming rights of the stadium are only valuable because Manchester City play there, but the Council must have been aware of that value by the time they signed off on the deal to relinquish the rights to MCFC.
I haven’t had enough time to fully digest the issues in these cases, but it again illustrates the important relationship between competition law and the business side of professional sport.
Update (17 June 2013)
If you are interested in this topic there is an excellent blog post ‘Public Funding of Stadiums and Arenas‘ with loads of technical detail, by Phedon Nicolaides, over on the Lexxion State Aid Blog.