Leicester, Everton and Financial Fair Play: The context and likely outcome

On October 25th, Everton will face an independent tribunal to find out if the Premier League’s charge against them for breaching financial fair play (FFP) rules has been upheld. If they are found guilty, the Toffees will face a punishment, a fine of some sorts or, in a worst-case scenario, a points deduction. If found guilty, too, the club could also face legal action from other clubs – including Leicester City – because of the impact that the Goodison Park outfit’s financial profligacy has had on them.

To understand what this is all about it is necessary to delve into the murky world of football finance. To do that, we need to go right back, in fact, to the early days of English football. The League’s founders had, from the outset at the end of the nineteenth century, regarded it as important to maintain at least some degree of financial equity between the clubs. This, they argued, helped to ensure that matches remained competitive and therefore maintained the interest of the public.

To this end, various stringent restrictions were placed on what clubs could do. These included, most importantly, a maximum wage that could be paid to players, the sharing of gate receipts and a tightly controlled transfer system in which players were tied to clubs who did not have to sell players and, if they did, could insist upon a fee being paid by a buying club. Later on, the money from broadcasters – in those days the terrestrial channels – was shared equally between all the clubs in the League structure.

By the 1980s, whilst most of these restrictions had disappeared, there was still a sharing ethos within the Football League, particularly in relation to broadcast revenues. This all changed when, in the early 1990s – seeing the massive potential offered by digital broadcast platforms – the biggest clubs (at the time, Manchester United, Arsenal, Tottenham, Everton and Liverpool) campaigned successfully for a breakaway from the League structure. Rather than sharing the proceeds with the rest of the football pyramid, the new Premier League, initially consisting of all First Division Clubs, kept all the cash for themselves, including the massive broadcasting windfall from Sky.