The European Commission to assess complaint against foreign subsidies allegedly granted to French football club Paris Saint-Germain
Competition law and State Aid rules are more often than you might think related to the world of professional sports. And now the spotlight has turned to another field of EU law. On 12 August 2023, La Liga, the national professional football league in Spain, announced in a press release that it has lodged a complaint with the European Commission (“the Commission”) alleging that Paris Saint-Germain’s (“PSG”) funding mechanisms violate the EU Foreign Subsidies Regulation (“FSR”) which recently entered into force.
Some of the most successful football clubs in Europe, such as Real Madrid CF and FC Barcelona, compete in La Liga. PSG on the other hand is a French football club which competes in Ligue 1, the national football league in France. At the European level, the top European football clubs (including inter alia PSG, Real Madrid CF and FC Barcelona) compete in European tournaments organised by Europe’s football governing body UEFA.
The level of financial support from non-EU governments in European football clubs has increased significantly in recent years. For example, PSG has been owned since 2011 by Qatar Sports Investments, a subsidiary of the Qatari government sovereign fund. Since the Qatari takeover, major investments have been made in PSG, especially in relation to player transfers and salaries. For example, in 2017-2018, PSG signed two of the most expensive football players, Neymar (purchased for a world-record transfer fee of EUR 222 million) and Kylian Mbappé (purchased for a transfer fee of EUR 180 million).
The FSR complaint
La Liga alleges that PSG has received foreign subsidies from the government of Qatar, providing PSG with an unfair competitive advantage. La Liga argues that these alleged foreign subsidies have distorted competition in several national and EU markets, notably by allowing PSG to “sign top players and coaches well above its potential in a normal market situation”.
The FSR, which is applicable in the EU since 12 July 2023, allows the Commission to open ex officio investigations and to take action against companies that receive financial support from non-EU governments deemed to distort competition within the EU single market. As from 12 October 2023, the FSR will also require companies to notify the Commission of certain large M&A transactions and public procurement bids which involve parties that have received financial contributions from non-EU governments. See Delphi’s article on the FSR here.
The Commission will now need to assess whether the financial support granted by Qatar constitute foreign subsidies within the meaning of the FSR and if they potentially risk distorting competition in the EU single market.
The complaint against PSG underlines how the FSR potentially could impact a particular market and the way subsidies from non-EU governments are awarded to companies in the EU. This complaint is preceded by another football-related FSR complaint. Earlier this year, Belgian club Royal Exelcior Virton announced in a press release that it had lodged a complaint before the Commission against its competitor SK Lommel who allegedly received distortive foreign subsidies via a capital injection of EUR 16.8 million from the Emirate of Abu Dhabi. Abu Dhabi has interests in City Football Group, a holding company which owns and administers several football clubs in Europe, notably its flagship football club and reigning UEFA Champions League winners Manchester City FC.
Depending on the outcome of the two football-related FSR cases, the FSR may prove to be an alternative route to combat “financial doping” in European football, which is the aim of the UEFA’s Financial Fair Play rules. Last year, La Liga filed a complaint with UEFA against PSG and Manchester City FC, alleging they violated the financial fair play rules.
The Commission’s previous decisional practice in the field of EU State Aid law shows its willingness to take up football-related cases. In 2016, the Commission found that various public support measures granted by Spain to seven Spanish professional football clubs (including Real Marid CF and FC Barcelona) constituted incompatible aid and ordered Spain to recover the aid from the football clubs, a decision which was upheld by the European Court of Justice in 2021.