Skip to main content
SpringerLink
Log in

Financial Regulation as an Anticompetitive Institution

  • Chapter
  • First Online:
The Palgrave Handbook on the Economics of Manipulation in Sport

Abstract

Financial regulation in sports is usually discussed in the context of representing an instrument against ‘financial doping’. Notwithstanding the merits of this discussion, this paper takes the opposite perspective and analyses how market-internal financial regulation itself may anticompetitively influence sporting results. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Sometimes, the actual winners and losers of financial regulation stand in line with the (legitimate) goals of the regulation like limiting financial imbalances or preventing distortive midseason insolvencies of teams. However, financial regulation may also display unintended side effects like protecting hitherto successful teams from new challengers, cementing the competitive order, creating foreclosure and entry barriers, or serving vested interests of powerful parties. All of these effects may also be hidden agendas by those who are implementing and enforcing market-internal financial regulation or influencing it. This paper analyses various types of budget caps (including salary caps) with respect to potentially anticompetitive effects. UEFA’s so-called Financial Fair Play Regulations are highlighted as an example. Furthermore, the paper discusses allocation schemes of common revenues (like from the collective sale of broadcasting rights) as another area of financial regulation with potentially anticompetitive effects. Eventually, the effects of standards for accounting, financial management and auditing are discussed.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    While between 50.7 (English Premier League) and 27.9% (German Bundesliga) of the revenues are generated from the collective sale of broadcasting rights, the existence of strict position-dependency revenues requires a specific type of distribution of these revenues (see section “Allocation of Common Revenues as Financial Regulation”), which, strictly speaking, does currently not exist in these leagues (Budzinski and Müller-Kock 2017: 11–12).

  2. 2.

    Examples include such diverse organisations as, inter alia, the Fédération Internationale de Football Association (FIFA), the International Olympic Committe (IOC), the National Football League (NFL), the International Association of Athletics Federations (IAAF), the Union des Associations Européennes de Football (UEFA), the United States Soccer Federation (USSF), the Niedersächsischer Judoverband (NJV), or the Fédération Internationale de l’Automobile (FIA).

  3. 3.

    Budzinski and Müller-Kock (2017) discuss an interesting case where financial regulation serves as a means to secure and exploit the market power of a sports promoter and to stabilise an anticompetitive cartel. This example represents an extreme case showcasing how manipulative to the sporting outcome financial regulation can be.

  4. 4.

    For the first view see with a comprehensive literature review Schubert and Hamil (2018).

  5. 5.

    See on the analysis of salary caps in team sports, inter alia, Dietl et al. (2011, 2012).

  6. 6.

    See for more details on exceptions and acceptable deviations UEFA (2015).

  7. 7.

    In the sports economics literature, talent is usually referring to playing talent. The point here is that FCK cannot use its (hypothetically) superior management talent to attract and utilize playing talent because of the financial advantage of Madrid, i.e. FCK is deterred from buying the extra talent it would need and it will quickly lose the playing talent they have to the richer teams.

  8. 8.

    Formula One motor racing represents a notable exception where the promoter is an independent investment company seeking to maximise its own profits from the sport. This creates scope for market power abuses by the promoter at the expense of the competing teams (see for details on this case Budzinski and Müller-Kock 2017).

  9. 9.

    For an overview and a discussion of allocation schemes used by selected premier-level professional leagues and championships see Budzinski and Müller-Kock (2017: 9–13).

  10. 10.

    If, for instance, a TV station spent more for sports broadcasting rights due to the monopoly-like price structure dictated by the cartel, then the whole TV audience will have to contribute to the higher prices by accepting higher pay-TV prices, more advertising in free TV and less investment in other (also non-sports) programmes.

  11. 11.

    It is quite notable and interesting how such a perspective contrasts with and goes beyond first glance fairness notions.

  12. 12.

    But see Keshock et al. (2014) for an interesting story of political economy of sports events and promotion.

References

  • Andreff, W. (2007). French Football—A Financial Crisis Rooted in Weak Governance. Journal of Sports Economics, 8(6), 652–661.

    Article  Google Scholar 

  • Budzinski, O. (2012). The Institutional Framework for Doing Sports Business: Principles of EU Competition Policy in Sports Markets. International Journal of Sport Management and Marketing, 11(1–2), 44–72.

    Article  Google Scholar 

  • Budzinski, O. (2014). The Competition Economics of Financial Fair Play. In O. Budzinski & A. Feddersen (Eds.), Contemporary Research in Sports Economics: Proceedings of the 5th ESEA Conference (pp. 77–98). Frankfurt a.M.: Lang.

    Chapter  Google Scholar 

  • Budzinski, O. (2017). Budgetungleichgewichte und Budgetregulierung im Profisport: Zur Bedeutung von Rattenrennen. In T. Pawlowski & M. Fahrner (Eds.), Arbeitsmarkt und Sport – eine ökonomische Betrachtung (pp. 65–83). Schorndorf: Hofmann.

    Google Scholar 

  • Budzinski, O. (2018). Competition Policy in Sports Markets. In Sage Handbook of Sports Economics. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Budzinski, O., & Müller, A. (2013). Finanzregulierung und internationale Wettbewerbsfähigkeit: Der Fall Deutsche Bundesliga. In R. Dewenter, J. Haucap, & C. Kehder (Eds.), Wettbewerb und Regulierung in Medien (pp. 261–290). Politik und Märkten, Baden-Baden: Nomos.

    Chapter  Google Scholar 

  • Budzinski, O., & Müller-Kock, A. (2017). Is the Revenue Allocation Scheme of Formula One Motor Racing a Case for European Competition Policy? Contemporary Economic Policy, 35. https://doi.org/10.1111/coep.12247.

    Article  Google Scholar 

  • Budzinski, O., & Pannicke, J. (2017). Does Popularity Matter in a TV Song Competition?—Evidence from a National Music Contest. Ilmenau Economics Discussion Papers, 22(106).

    Google Scholar 

  • Budzinski, O., & Pawlowski, T. (2017). The Behavioural Economics of Competitive Balance—Theories, Findings and Implications. International Journal of Sport Finance, 12(2), 109–122.

    Google Scholar 

  • Budzinski, O., & Szymanski, S. (2015). Are Restrictions of Competition by Sports Associations Horizontal or Vertical in Nature? Journal of Competition Law & Economics, 11(2), 409–429.

    Article  Google Scholar 

  • Coates, D., Humphreys, B., & Zhou, L. (2014). Reference-Dependent Preferences, Loss Aversion, and Live Game Attendance. Economic Inquiry, 52(3), 959–973.

    Article  Google Scholar 

  • Dietl, H., Franck, E., Lang, M., & Rathke, A. (2012). Salary Cap Regulation in Professional Team Sports. Contemporary Economic Policy, 30(3), 307–319.

    Article  Google Scholar 

  • Dietl, H., Lang, M., & Rathke, A. (2011). The Combined Effect of Salary Restrictions and Revenue Sharing in Sports Leagues. Economic Inquiry, 49(2), 447–463.

    Article  Google Scholar 

  • Dietl, H., Lang, M., & Werner, S. (2010). The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues. International Journal of Sport Finance, 5(1), 41–51.

    Google Scholar 

  • El-Hodiri, M., & Quirk, J. (1971). An Economic Model of a Professional Sports League. Journal of Political Economy, 79, 1302–1319.

    Article  Google Scholar 

  • Falconieri, S., Palomino, F., & Sákovics, J. (2004). Collective Versus Individual Sale of Television Rights in League Sports. Journal of the European Economic Association, 2(5), 833–862.

    Article  Google Scholar 

  • Feddersen, A., Humphreys, B. R., & Soebbing, B. P. (2012). Contest Incentives in European Football (Working Paper No. 2012–13). University of Alberta.

    Google Scholar 

  • Fort, R., & Quirk, J. (1995). Cross-Subsidization, Incentives and Outcomes in Professional Team Sports Leagues. Journal of Economic Literature, 33(3), 1265–1299.

    Google Scholar 

  • Franck, E. (2014). Financial Fair Play in European Club Football—What Is It All About? International Journal of Sport Finance, 9(3), 193–217.

    Google Scholar 

  • Franck, E. (2016). A Comment on the Newly Revised “2015 Version” of the UEFA Club Licensing and Financial Fair Play Regulations. UZH Business Working Paper. Universität Zürich.

    Google Scholar 

  • Gammelsæter, H., & Senaux, B. (2011). Understanding the Governance of Football Across Europe. In H. Gammelsæter & B. Senaux (Eds.), The Organisation and Governance of Top Football Across Europe: An Institutional Perspective (pp. 268–291). London: Routledge.

    Chapter  Google Scholar 

  • Gürtler, O. (2007). A Rationale for the Coexistence of Central and Decentral Marketing in Team Sports. German Economic Review, 8(1), 89–106.

    Article  Google Scholar 

  • Humphreys, B. R., & Zhou, L. (2015). The Louis-Schmeling Paradox and the League Standing Effect Reconsidered. Journal of Sports Economics, 16(8), 835–852.

    Article  Google Scholar 

  • Késenne, S. (2000). Revenue Sharing and Competitive Balance in Professional Team Sports. Journal of Sports Economics, 1(1), 56–65.

    Article  Google Scholar 

  • Késenne, S. (2009). The Impact of Pooling and Sharing of Broadcasting Rights in Professional Team Sports. International Journal of Sport Finance, 4(3), 211–218.

    Google Scholar 

  • Keshock, C. M., Forester, B., & Holden, S. (2014). Gridiron Games—A Case Analysis of Turf War Issues and the Economic, Social, Cultural, and Political Incentives for Government Subsidization. In O. Budzinski & A. Feddersen (Eds.), Contemporary Research in Sports Economics: Proceedings of the 5th ESEA Conference (pp. 231–244). Frankfurt a.M.: Lang.

    Google Scholar 

  • Könecke, T., & Schubert, M. (2014). Socio-Economic Doping and Enhancement in Sport: A Case-Based Analysis of Dynamics and Structural Similarities. In O. Budzinski & A. Feddersen (Eds.), Contemporary Research in Sports Economics: Proceedings of the 5th ESEA Conference (pp. 97–114). Frankfurt a.M.: Lang.

    Google Scholar 

  • Lang, M., Grossman, M., & Theiler, P. (2011). The Sugar Daddy’s Game: How Wealthy Investors Change Competition in Professional Team Sports. Journal of Institutional and Theoretical Economics, 167(4), 557–577.

    Article  Google Scholar 

  • Madden, P. (2015). Welfare Economics of “Financial Fair Play” in a Sports League with Benefactor Owners. Journal of Sports Economics, 16, 159–184.

    Article  Google Scholar 

  • Maxcy, J. (2014), The American View on Financial Fair Play. In O. Budzinski & A. Feddersen (Eds.), Contemporary Research in Sports Economics: Proceedings of the 5th ESEA Conference (pp. 57–73). Frankfurt a.M.: Lang.

    Google Scholar 

  • Morrow, S. (2011). History, Longevity, and Change: Football in England and Scotland. In H. Gammelsæter & B. Senaux (Eds.), The Organisation and Governance of Top Football Across Europe: An Institutional Perspective (pp. 46–61). London: Routledge.

    Google Scholar 

  • Neale, W. C. (1964). The Peculiar Economics of Professional Sports: A Contribution to the Theory of the Firm in Sporting Competition and in Market Competition. Quarterly Journal of Economics, 78(1), 1–14.

    Article  Google Scholar 

  • Noll, R. G. (2007). Broadcasting and Team Sports. Scottish Journal of Political Economy, 54(3), 400–421.

    Article  Google Scholar 

  • Pawlowski, T., & Nalbantis, G. (2018). Competitive Balance: Measurement and Relevance. In Handbook of Sports Economics. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Peeters, T. (2011). Broadcasting Rights and Competitive Balance in European Soccer. International Journal of Sport Finance, 6(1), 23–39.

    Google Scholar 

  • Peeters, T. (2012). Media Revenue Sharing as a Coordination Device in Sports Leagues. International Journal of Industrial Organization, 30(2), 153–163.

    Article  Google Scholar 

  • Peeters, T., & Szymanski, S. (2014). Financial Fair Play: Winners and Losers on and off the Pitch. In O. Budzinski & A. Feddersen (Eds.), Contemporary Research in Sports Economics: Proceedings of the 5th ESEA Conference (pp. 17–33). Frankfurt a.M.: Lang.

    Google Scholar 

  • Peeters, T., & Szymanski, S. (2015). Financial Fair Play in European Football. Economic Policy, 29, 343–390.

    Article  Google Scholar 

  • Preuss, H., Haugen, K., & Schubert, M. (2014). UEFA Financial Fair Play: The Curse of Regulation. European Journal of Sport Studies, 2(1), 33–51.

    Google Scholar 

  • Rottenberg, S. (1956). The Baseball Player’s Labour Market. Journal of Political Economy, 64(3), 242–258.

    Article  Google Scholar 

  • Sass, M. (2016). Glory Hunters, Sugar Daddies, and Long-Term Competitive Balance Under UEFA Financial Fair Play. Journal of Sports Economics, 17(2), 148–158.

    Article  Google Scholar 

  • Schubert, M., & Hamil, S. (2018). Financial Doping and Financial Fair Play in European Club Football Competitions. In The Palgrave Handbook on the Economics of Manipulation in Sport (pp. 135–157). Basingstoke/New York: Palgrave Macmillan (this volume).

    Chapter  Google Scholar 

  • Schubert, M., & Könecke, T. (2015). Classical Doping, Financial Doping and Beyond: UEFA’s Financial Fair Play as a Policy of Anti-doping. International Journal of Sport Policy and Politics, 7(1), 63–86.

    Google Scholar 

  • Schubert, M., Könecke, T., & Pitthan, H. (2016). The Guardians of European Football—UEFA Financial Fair Play and the Career of Social Problems. European Journal for Sport and Society, 13(4), 296–324. https://doi.org/10.1080/16138171.2016.1248094.

    Article  Google Scholar 

  • Storm, R. K., & Nielsen, K. (2012). Soft Budget Constraints in Professional Football. European Sport Management Quarterly, 12, 183–201.

    Article  Google Scholar 

  • Szymanski, S. (2014). Fair Is Foul: A Critical Analysis of UEFA Financial Fair Play. International Journal of Sport Finance, 9(3), 218–229.

    Google Scholar 

  • Szymanski, S., & Késenne, S. (2004). Competitive Balance and Gate Revenue Sharing in Team Sports. The Journal of Industrial Economics, 52(1), 165–177.

    Article  Google Scholar 

  • UEFA. (2015). UEFA Club Licensing and Financial Fair Play Regulations (Edition 2015). www.uefa.org/MultimediaFiles/Download/Tech/uefaorg/General/02/26/77/91/2267791_DOWNLOAD.pdf.

  • Vöpel, H. (2011). Do We Really Need Financial Fair Play in European Club Football? An Economic Analysis. CESifo DICE Report, 9(3), 54–60.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Ilmenau University of Technology, Ilmenau, Germany

    Oliver Budzinski

Authors
  1. Oliver Budzinski
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Oliver Budzinski .

Editor information

Editors and Affiliations

  1. School of Business, SRH University Heidelberg, Heidelberg, Germany

    Markus Breuer

  2. Centre for Sports Business, Management School, University of Liverpool, Liverpool, UK

    David Forrest

Rights and permissions

Reprints and permissions

Copyright information

© 2018 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Budzinski, O. (2018). Financial Regulation as an Anticompetitive Institution. In: Breuer, M., Forrest, D. (eds) The Palgrave Handbook on the Economics of Manipulation in Sport. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-77389-6_9

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-77389-6_9

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-77388-9

  • Online ISBN: 978-3-319-77389-6

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation