Man City score huge victory as Premier League’s sponsorship rules ‘declared unlawful’

Man City have scored a victory against the Premier League with a ruling that the Citizens were ‘unfairly blocked from agreeing two huge sponsorship deals earlier this year’.

The Premier League champions challenged the league’s associated party transaction (APT) rules in a hearing which ended in late June. Man City challenged the validity of the rules under UK competition law.

The Times , which first reported details of Man City’s claim, said the club were seeking to scrap the rules, which were first introduced in December 2021 following the Saudi-led takeover of Newcastle United and were most recently strengthened in February.

The rules are designed to ensure any commercial deal or player transfer between a club and entities with links to that club’s ownership are conducted at fair market value, so that club revenues are not artificially inflated.

And now The Times reporter Matt Lawton has revealed that Man City have scored a major victory as the Premier League’s sponsorship rules have been ‘declared unlawful’.

Lawton wrote:

‘Manchester City have inflicted a potentially damaging defeat on the Premier League after the rules governing commercial deals between clubs and related companies were declared unlawful.

‘In a landmark decision that could have huge ramifications for England’s top flight, it was ruled that City were unfairly blocked from agreeing two huge sponsorship deals earlier this year.

‘It opens the door for the English champions, majority-owned by Abu Dhabi, to strike significantly higher sponsorship agreements with associated parties than previously allowed — including with Etihad, their stadium and shirt sponsor — and to pursue compensation and costs from the Premier League for abusing its position. Other clubs could also now seek damages should they believe they have been impacted.

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‘An independent panel of three retired judges concluded that the rules were unlawful because they did not take into consideration interest-free loans which shareholders lend to clubs. The decision will spark huge concern among a number of City’s Premier League rivals — who rely heavily on such loans — and is likely to lead to the rules being changed.

‘The panel states that, of the £4billion in total borrowing across the Premier League, £1.5billion is in loans from club owners and shareholders. If the rules are altered and commercial loan rates are now applied to these interest-free loans and have to be included in a club’s profitability and sustainability calculation, many clubs could find they are in breach of Profitability and Sustainability Rules (PSR).’

With the arbitration panel declaring the APT rules invalid, clubs could now effectively be free to do any commercial deals they wished without any independent judgement being made on whether those deals were for fair market value.

That could then in turn help clubs boost their declared revenue and give them greater leeway on transfer and wages spending under financial sustainability rules. There are fears it could lead to the clubs whose owners have the deepest pockets – Man City and Newcastle – effectively being in a league of their own in terms of spending.