- Growth of MCO groups and new competition structures will lead to increase in integrity concerns
- Number of clubs in MCO groups has more than doubled since 2018, SportBusiness report shows
- US investors target distressed assets but underestimate the challenges of European football
An in-depth SportBusiness investigation into football’s multi-club ownership phenomenon has charted Uefa’s collision course with powerful ownership groups such as City Football Group, Red Bull and 777 Partners, as new ‘Swiss model’ formats in European club competitions are set to create conflicts of interest on an unprecedented scale.
Multi-club Ownership: The Unproven Concept Transforming Football suggests that the number of conflict-of-interest cases set to be investigated under the governing body’s integrity rules – which can result in teams being eliminated from its competitions – should rise sharply over the coming years.
From the 2024-25 season, the Champions League, Europa League and Conference League will operate on the ‘Swiss model’, with teams in each competition being ranked from one to 36 in an initial league phase. This format brings all clubs into direct competition from the outset, creating much broader integrity issues than at present, where clubs of the same ownership group are occasionally drawn against one another.
The new formats are being brought in at a time when the number of clubs owned by MCO groups is growing exponentially. By November 2023, there were 124 entities worldwide which owned two or more football clubs. The report, produced in collaboration with CIES Sports Intelligence, found that a total of 301 clubs around the world are part of MCOs.
Since 2015, the number of clubs in MCO groups has increased by a multiple of almost five and the number has more than doubled since 2018. Of the total 301 clubs, 197 play in Europe and 97 play in the country’s top divisions – with an opportunity to qualify for one of Uefa’s three pan-continental club competitions.
Article 5 under scrutiny
For Uefa’s club competitions, the basis of integrity cases is Article 5 of its Uefa club competition regulations. Article 5 prohibits the same individual or legal entity from having “control or influence” over more than one club playing in the same Uefa club competition. This includes the ability to exercise “a decisive influence in the decision-making of the club”.
Article 5 replaced an earlier integrity rule which said that “an individual or legal entity has control of a club where he/she/it: a) holds a majority of the shareholders’ voting rights, or, b) has the right to appoint or remove a majority of the members of the administrative, management or supervisory body, or, c) is a shareholder and alone controls a majority of the shareholders’ voting rights pursuant to an agreement entered into with other shareholders of the club in question”. The new rule does not require an owner to have a majority stake.
The acquisition of the 25-per-cent stake in Manchester United by Jim Ratfcliffe’s Ineos group, for example, is reported to provide Ratcliffe with complete control over the sporting side of the club. This would almost certainly fall under Uefa’s definition of “decisive influence” if the club qualified for the same competition as Ligue 1 club Nice, also owned by Ineos.
Similarly, City Football Group’s ownership of a 44.3-per-cent stake in LaLiga leaders Girona would trigger an investigation if the Spanish club and CFG’s flagship club, Manchester City, were both to qualify for the Champions League.
To date, integrity investigations by Uefa have been rare. Three precedents have been spread over a 25-year period, from 1998 to 2023.
The first case, between 1998 and 2002, involved British firm English National Investment Company, after three of its teams – SK Slavia Prague, AEK Athens and Vicenza Calcio – reached the quarter-finals of the Uefa Cup Winners’ Cup in the 1997-98 season.
Uefa’s exclusion of AEK Athens from the Uefa Cup the following season (while allowing Slavia Prague to compete) was challenged by Enic, first at the Court of Arbitration for Sport and then at the European Commission. Uefa’s intervention was upheld. It was after this case that Uefa replaced its original integrity rule with Article 5 and introduced the notion of decisive influence.
The next case, involving Red Bull teams RB Leipzig and Red Bull Salzburg, did not happen until RB Leipzig and Red Bull Salzburg both qualified for the 2017-18 Champions League. Initially, the Uefa Club Financial Control Body (CFCB) found that Red Bull had a decisive influence over both clubs and therefore only Red Bull Salzburg could be admitted to the competition. However, following further submissions by the clubs, it reversed the decision and allowed both clubs to compete.
The difficulty of accurately defining decisive influence in a legally watertight manner was a factor in the reversal. Red Bull also made changes to the governance of the two clubs which Uefa accepted.
In July 2023, Uefa intervened in three situations where clubs from the same ownership groups were drawn in its competitions in the 2023-24 season. These were: Aston Villa and Vitória Sport Clube (owned by Wes Edens and Nassef Sawaris); Brighton & Hove Albion and Royal Union Saint-Gilloise (Tony Bloom); and AC Milan and Toulouse FC (RedBird Capital).
The CFCB initially opposed the entry of the teams on integrity grounds but later allowed them after the owners agreed to a series of remedies which, to all intents and purposes, negated any of the network effect benefits of being a member of an MCO group.
Article 5 under review
Since being drafted in 2001 in response to the Enic case, Article 5 has never been altered or modified.
Sports lawyers and governance experts say that it is too vague in its language. For Uefa, this has the advantage of allowing the governing body a degree of flexibility in its application. Its main disadvantage is that it is unclear exactly what it means.
Within Uefa there is an awareness that the rules were written at a time when multi-club ownership was rare, with investments in football from private equity and sovereign wealth funds still years away. Discussions are under way at the governing body about adapting the rules but there is currently no timetable on a decision.
For its club competitions in 2024-25, Uefa looks set to be still using Article 5, despite all its limitations. As MCO grows to encompass more of Europe’s top clubs, the matter has become as political as it is technical.
In March, Uefa president Aleksander Čeferin gave an interview with footballer-turned-pundit Gary Neville in which he said: “This multi-club ownership question is an interesting question. I think we should think about it for the future and see what to do. There is more and more interest for this multi-club ownership and we shouldn’t just say no to the investments, and for multi-club ownership. But we have to see what kind of rules we set in that case, because rules have to be strict. I think it has to be quick because, you know, everything has to happen quickly in football.”
Some European club sources say that Čeferin’s position has been complicated by the fact that his most powerful political ally in football is part of an MCO group. Nasser Al-Khelaifi, the chairman of Ligue 1 club Paris Saint-Germain, is also president of Qatar Sports Investments, which owns PSG and holds a 29.6-per-cent stake in Portuguese club Sporting Club de Braga. Al-Khelaifi played a central role in Uefa’s successful resistance to the aborted 2021 European Super League (ESL) project.
One investment banker who advises clubs on potential acquisitions described the current regulatory framework as a “limbo” and said that a clearer picture was required for everyone involved. A review of the MCO rules is under way at Uefa but there are currently no signs that change will happen before the spring, when the qualification places for Uefa competitions will be decided.
Another issue Uefa has to confront is the actual policing of its regulations. In investigations such as those that took place this summer, it has to assume that the six clubs involved are respecting Article 5 and putting into place the agreed remedies. The governing body has no way of knowing whether or not something else is happening behind the scenes.
This raises an even more profound question: if Uefa is not capable of policing its rule, does its existence make any sense?
Power and control
In the longer term, consolidation between MCO groups could pose a challenge to Uefa’s control over European football, raising the spectre of a breakaway or the creation of parallel structures.
The aborted Super League required the agreement of 12 club owners. The project failed because of disharmony between the clubs in the face of a backlash from fans and media. If ownership consolidation leads to the creation of large blocs of European clubs, future breakaway projects may only need three or four influential groups to mount a successful breakaway.
Of the 12 founders of the ESL, six clubs – Manchester City, Manchester United, Arsenal, Chelsea, AC Milan and Atlético de Madrid – are part of MCO groups. Inter Milan’s owner Suning also owned a club in the Chinese Super League until the club’s dissolution in February 2021. Liverpool’s owners Fenway Sports Group also owns clubs and teams in other sports in the US, including baseball, ice hockey and motorsport.
There are other intangible issues of football politics. The influx of US owners — encompassing both MCO groups and individual concerns — inevitably gives them a seat at the table of league bodies. This has raised concerns that a critical mass of US ownership could move football — where statutes allow – to a US-style franchise model without relegation and promotion.
Most of the new money coming into MCO is from North America, which now accounts for almost one third of all MCO groups. No other country accounts for more than six per cent.
Disputes around the impact of MCO on football competitions also appear set for a serious escalation at domestic level. In November, MCO provoked a profound split among the clubs in the Premier League, which was seeking to regulate the loans of players between clubs in the same MCO group.
In a vote on the matter, eight clubs blocked an attempt by the league to restrict such loans. Of the eight clubs – Burnley, Chelsea, Everton, Manchester City, Newcastle United, Nottingham Forest, Sheffield United and Wolverhampton Wanderers – all but two are part of MCO groups. Burnley’s owner, ALK Capital, is reported to be considering expansion. Wolves has a strategic association with Swiss club Grasshopper of Zurich.
In February, Uefa said that MCO had the “potential to distort” the transfer market for players because of “an increasing percentage of transfers being executed within multi-club investment groups at prices that suit investors, rather than at fair values”.
The governing body said that most movement of players within multi-club investment groups was via free transfers or loans, with no fees paid. “With the growth of cross-investment structures, some football investors may now exert control over clubs spanning a cumulative total of a few hundred registered players,” Uefa said.
As the latest research by SportBusiness and CIES Sports Intelligence shows, this number is set to increase dramatically, should MCO growth continue on its current trajectory.