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SBD Global/August 8, 2013/International Football

European Commission Could Soon Force Real Madrid, Barcelona, Others To Become PLCs

Real Madrid and Barcelona could soon become Public Limited Companies.
Real Madrid and Barcelona "could soon be forced by the European Commission to relinquish their privileged status as member-owned clubs" and are likely to become Public Limited Companies, "losing one of the key advantages behind their dominance of Spanish football and success in European competition," according to Sam Wallace of the London INDEPENDENT. The European Commission competition office's four-year investigation into "allegations of illegal state aid against both Madrid and Barcelona, linked to their status as membership clubs, is at tipping point." It is the second EC investigation into Madrid, which is "also under scrutiny for a land deal with Madrid city council dating back to 1996 which critics believe constitutes illegal state aid." Both investigations are "coming to a head against the backdrop of a summer in which Madrid prepare to break the transfer world record again," with an £80M-plus ($124M) bid for EPL Tottenham's Gareth Bale. In '90, the Spanish government ruled that "all clubs apart from Madrid, Barcelona, Athletic Bilbao and Osasuna were obliged to become limited companies." The issue of Madrid and Barcelona's privileged status has "proved a major problem for the EC competition office, which has a number of Spanish nationals in prominent positions." Having received the initial complaint in Nov. '09, it has "delayed reaching a decision on the issue despite a regulation one-year deadline." Now the European Ombudsman has "intervened in the matter." The Ombudsman is an "independent adjudicator with power over decisions taken by European institutions" (INDEPENDENT, 8/7).

'UNFAIR EDGE': In a separate piece, Wallace reported "as well as being treated as not-for-profit organisations, the four exempted clubs benefit under corporation and property tax laws." They are also permitted to have "affiliate professional basketball clubs which operate out of the same structure, an important factor in a country where basketball is the second sport." The Spanish economy is "in meltdown," with unemployment at 26% and youth unemployment at 50%. Yet "none of this" affected the spending power of Real Madrid, "and to a lesser extent Barcelona." Estimated by Deloitte to be the first, and only football club with an annual revenue in excess of €500M ($666M), Madrid is recognized as "the most valuable club in the world." The total debt of clubs in the league is "estimated at €4.1B ($5.5B)." It is "evident that whatever the extent of the privileges lavished on Madrid, Barcelona and the two other exemptions, the plc status -- or 'Sociedades Anonimas Deportivas' [SAD] is not working for the rest" (INDEPENDENT, 8/6).

PREMILINARY PHASE: The EFE reported "sources explained that the case has not been made public because the investigation is in the 'preliminary phase.'" The investigation, which is led by EC member Joaquín Almunia, began in '09 "following complaints about the advantages the clubs receive" from not being PLCs. Those who made the complaints met in Dec. '11 at the Defensor del Pueblo "Report to Parliament" to protest "the slow management of the case and the lack of conclusions." In response, the Report to Parliament wrote to the EC to propose a fast, agreeable solution. A Report to Parliament spokesperson said that "it had asked the EC to arrive at a conclusion or explain the reasons why it cannot." The Report to Parliament office "is waiting for the EC's official response" (EFE, 8/7).
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Europe, International Football

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