Barca and Real to lose member-owned status?

That Independent reports that the European Commission may force Barcelona and Real Madrid to end their historic status as member-owned clubs. Both are alleged to have taken illegal state aid. But is it the right move? Vic Crescit knows a thing or two about Spanish football and he thinks not…

The academic economists who inhabit the European Commission’s Competition Directorate have been beavering away in their offices in Brussels’ quartier européen investigating complaints that both the Iberian giants have been illegal recipients of state aid which is banned under European single market rules.

The idea is that the 27 member states of the European Union are banned from subsidising any private business in any way. This includes not only central but regional and municipal governments too.

Everybody has known for decades that Real Madrid were the favoured champion of the Castilian ascendency which rose to power under the long night of the fascist dictatorship of El Generalísimo Francisco Franco from 1938 to 1973.

Barcelona became the darling of the Catalan nation whose language and culture was oppressed and banned by the Madrid government. One of the few places that it was safe to speak Catalan without having one’s collar felt by the police was in the stands and terraces of the Camp Nou (which ironically had to be known officially at the time as El Campo Nuevo in Castilian Spanish – the sole legally permitted language).

The backdoor public subsidies received by Real Madrid through various deals - in particular land swaps and grants - with the Madrid municipality are well known and decades old. Slightly newer are the potentially unlawful subsidies received by Barcelona from the Barcelona municipality and the Generalitat, Iberian Catalonia’s autonomous parliament.

The problem isn’t recognising and dealing with these infamnias. It’s the thinking of how to deal with them that’s the problem. The European Commission’s Competition Directorate is a little island of neo-liberal free market fundamentalist thinking in a sea of European Christian/Social Democrat centrist consensus. You can see it from their point of view. They see an endless trail of special interest lobbyists for that industry and this service sector all saying why the rules banning State aid shouldn’t apply to them.

The problem is that professional team sports ARE different, something that the European Court of Justice in Luxembourg has recognised in repeated decisions about professional sport. The ECJ has said that governing bodies of sports can make decisions which wouldn’t normally be permitted under EU competition law provided that they’re necessary, proportionate and promulgated principally or wholly for sporting reasons.

In 2003 a delegation of Westminster MPs and football supporter representatives led by Andy Burnham MP (then chair of Supporters Direct) went to see (then) EC Competition Commissioner Mario Monti about the Commission’s “statement of objections” to the collective selling of broadcasting rights by the Premier League. The EC Competition Directorate wanted every single match available for separate sale to the highest bidder.

For 45 minutes Burnham and co were lectured by the Harvard-educated Monti and his Finnish right-hand man about the beauties of the free market. Fans in attendance tried to point out in vain what a disaster this approach had led to in Italy and Spain [editors note - the "big" clubs benefit leading to huge financial gaps between the haves and have nots]. Monti was patronising and arrogant.

Subsequent events in Spain and Italy have proved fans absolutely right and the Competition Directorate nerds with their perfect computer models wrong. Totally wrong. Just like they’re wrong about the solution to unlawful State aid to Real Madrid and FC Barcelona being compulsory conversion to limited companies. This has been tried in Spain already. It’s been a disaster.

In 1990 a new professional sports law required all football clubs whose indebtedness exceeded published limits to be compulsorily converted into limited companies from their previous status as member-owned mutual associations by 1994.

Only Real Madrid, FC Barcelona, Athletic Bilbao and CA Osasuna had sufficiently low debts to stay member owned. The rest became limited companies. It’s been a disaster. Club indebtedness has increased tenfold in real terms.

There is an answer to unlawful State aid to Real Madrid and FC Barcelona. Privatisation isn’t it.

Fine both the club and the offending public bodies an amount equivalent to the unlawful subsidies, plus a substantial penalty. Make it clear that the offending institutions will be required to open their books to Commission appointed auditors which the offending clubs will be billed for by the Commission. That’s the way forward.

Requiring civil associations to become limited companies is expropriation of members’ property. The penalty doesn’t come close to fitting the crime.

Thanks to Action Images for the image reproduced in this blog.

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