Written by: Peter Davie
On 30 July 2023, Allan Saint Maximin completed his £23 million move from Newcastle to Saudi Pro League side Al Ahli. The legitimate transfer, agreed between two teams with the same majority ownership, the Saudi Arabia Public Investment Fund (PIF), has led to the Premier League (PL) having to defend its Fair Market Value (FMV) rules. Equally, Chelsea recently played their first game with their new front of shirt sponsor ‘Infinite Athlete’. With the company undergoing a prolonged seven-week FMV assessment due to it being founded in August 2023 and its links to Chelsea owner Todd Boehly.
Critics believe that sums paid between related parties may be being inflated, potentially enabling clubs to ‘balance their books’ and therefore comply with the PL’s Profit and Sustainability (PS) rules. Although both transactions were compliant, the PL’s relatively new FMV regulations are clearly coming under scrutiny. So much that Premier League CEO Richard Masters has recently spoken out in their defence, describing them as ‘robust’.
What are the rules?
The rules, introduced by the Premier League on 14 December 2021, require clubs to prove that all commercial deals with ‘associated parties’ represent FMV. There are three fundamental aspects to break down here: commercial deals, associated parties and fair market value.
Commercial deals in relation to FMV are defined in the 2023/24 PL handbook (Handbook) as ‘Associated Party Transactions’ and this covers any transaction worth more than £1 million a year. The scope of the rules therefore covers the vast majority of both transfers and sponsorship agreements in the PL. ‘Associated Parties’ is defined in the Handbook as ‘a Person associated with the Club. In considering each possible Associated Party relationship, the League will direct its attention to the substance of the relationship and not merely the legal form’. The Handbook lists fifteen factors which the PL will take into consideration and examples include family ties, degree of control, shareholding, financial interests and influence. Finally, FMV is defined as ‘the amount for which an asset, right or other subject matter of the Transaction could be sold, licensed or exchanged, a liability settled, or a service provided, between knowledgeable, willing parties in an arm’s length transaction’.
To determine whether a transaction is for FMV, the PL undertakes a Fair Market Value Assessment, whereby both transactional and club factors listed at Appendix 18 of the Handbook are taken into consideration. Examples of transactional factors include historic similar agreements the club has entered into, similar transactions in football, the tier of partnership, media exposure, market trends and obligations on the parties. On the other hand, when considering the club aspect of the assessment, factors considered include the fan base, brand value, playing success and geographical location. Chelsea’s sponsorship deal with Infinite Athlete was found to be for FMV, as the company was new but was formed by consolidating previously owned companies that already had clients in the NFL.
In short, the aim of the FMV rules is to make sure clubs cannot hide or disguise owner investment. By asking whether or not the transaction has been done on an ‘arm’s length basis’, the PL is asking the question of whether two unconnected parties would have agreed the price and terms of the transaction.
Why are they controversial?
The overarching issues many clubs have is that the rules, and particularly the definitions of ‘Associated Party’ and ‘Associated Party Transaction’, are too broad. This, combined with the fact that the Premier League has stated that its focus is on the ‘substance of the relationship and not merely the legal form’, has raised concerns that the PL has uncontrolled discretion in deciding whether or not to approve transactions. Further, whilst the PL has made the factors taken into consideration available in its handbook, this is followed by a catch-all provision detailing that the weight given to any individual factor is at ‘the discretion of the Independent FMV Assessor’. The lack of any further guidance published by the PL as to the application of the rules means clubs may be unclear on the decision-making process involved.
As part of the introduction of the rules, the PL created an anonymised databank of all previous commercial transactions entered into by Premier League clubs dating back to January 2016, defined in the Handbook as the ‘League Databank’. The databank allows the PL to compare proposed deals to historic transactions and the data is therefore fundamental in the PL’s assessment of whether a transaction is for FMV. However, issues have been raised over the validity of the data. First, considering the variation in size and revenue of the clubs in the PL, clubs want assurances that the FMV calculations are tailored accordingly. Second, clubs want to know how the PL has factored economic changes over the past nine years into its calculations, with inflation on player transfers increasing by 116% from 2013/14 to 2022/23.
Undoubtedly all Premier League sides seek to use creative methods in efforts to comply with PS rules. Whilst assessing FMV is not an exact science, the PL would quell concerns if it provided clubs with more transparency as to exactly how both data and FMV Assessment Factors are used to inform its decision making. Overall, the nature of football club ownership and the intricate web of relationships between clubs, owners, and affiliated entities means regulating related party transactions is an issue firmly on the PL’s agenda. As demonstrated by the PL shareholder meeting on introducing a temporary ban stopping teams from loaning players from clubs under the same ownership in the January transfer window set to take place in two days’ time (Tuesday 21 November).
Disclaimer: The views expressed in this article are solely those of the author.
 PL Handbook – (A.1.23)
 PL Handbook – (A.1.94)
 PL Handbook – (A.1.95)
 PL handbook – (Appendix 18. D)
 PL handbook – (Appendix 18. D)
 PL handbook – (Appendix 18. D. Provision 9)
 PL handbook – (E.70)