Introducing Hard Budget Constraints Without Restricting Entrepreneurs: The Role of Voluntary Agreements in UEFA’s Club Licensing and Financial Fair Play Regulations

In the past European club football provided a textbook example of the “soft budget constraints phenomenon” initially described by Janos Kornai. As a remedy UEFA introduced the Club Licensing and Financial Fair Play Regulations (FFP). The Break-Even Requirement and the Fair Market Value Principle were the main elements of these regulations since their introduction in 2009 and first application in 2012. In 2015 the new concept of Voluntary Agreements was added. Which is the presumed rationale behind this major amendment of the rules? After analyzing the effects of The Break-Even Requirement and the Fair Market Value Principle, we propose that the new concept of Voluntary Agreements makes FFP less vulnerable to the allegation that it discriminates against true entrepreneurs wishing to develop mismanaged football clubs into sustainable businesses. Voluntary Agreements give such entrepreneurs more flexibility to invest, which would be of particular importance in environments where quality is only slowly remunerated by the football markets. The fact that not a single Voluntary Agreement has been signed until January 2020 is hard to reconcile with the allegation of discrimination.