The Palgrave Handbook on the Economics of Manipulation in Sport

The book is divided into five sections. The first section introduces the topic, discusses definitions of manipulation and puts everything within the context of changes in the broad market for sport. Section two deals with specific types of manipulation in professional sport. The third section focuses on how the law deals with manipulation. Section four discusses manipulation at the level of sports organisations. Finally, Section five offers some reflections, based on contributions from our various authors, on how the diverse forms of manipulation prevalent in contemporary sport should be addressed and the role of economic thinking in framing appropriate policy.

Increased money inflow into sports and its globalisation have triggered a number of dysfunctions, manipulations and corrupt practices over the last four decades or so, creating a so-called dark side of sport and its industry. Nowadays, such behaviours spread over an increasing set of sport disciplines worldwide; first, they simply breach sport rules; then they infringe the sport ethics and jeopardise sport integrity.

The purpose of this chapter is to provide, in an integrative manner, an overview of the status of research on the various impacts of manipulation on the global demand for sport. In particular, the effects of doping affairs, match fixing and corruption in professional sports on the demand for sport are considered. Although manipulation in sports and demand for sports are already extensively studied within the literature reviewed, how each of them is linked and how demand is affected by manipulation have been examined only very sparsely.

The sport industry is a unique segment of economic activity which spans across the public, private and voluntary sectors like no other industry. The fastest growing sector is undoubtedly professional sport where sport is commercialised for profit; nations, cities, businesses and individuals reap economic rewards. This growth is primarily due to the manipulation of sport by the media, producing the televised sport product and realising increased values from media rights (Forbes 2016). Most recently the rise of e-gaming (Hamari and Sjoblom 2017) is a new and innovative manipulation of sport and technology to create a product highly sought after by Millennial markets. Nielsen has recently launched a new e-sport business to help define and quantify value for the competitive gaming market, thought to be worth over 900 million USD (Beck 2016). And so, the world of professional and e-sports represents considerable opportunity for entrepreneurs, new business models and innovative products. Yet the commercialisation of professional sport as a form of manipulation has been happening to sport in general for hundreds of years and may also create negative impacts on society and on the world of sport management.

Doping is a ubiquitous phenomenon in every type of sport. However, some cases appear particularly spectacular. In this article, we show that the elite sports framework provides strong incentives to use doping substances. These incentives are greatest for sports with precisely measurable results and they are weakest in the case of team sports. Although it is hard to justify a legal ban of doping methods, it makes sense for the organizer to hinder athletes who are using doping methods to take part in the contest. To fight against doping, a wide range of measures is available. A penalty-carrying ban based on the negative list comes closest to the objective; however, it also offers strong incentives to evade the negative list, in other words in favour of doping innovation. One way out of this dilemma is presented by the accompanying innovation bonus, which rewards the registration of doping innovations. The possibility of liberalizing doping for adult athletes should also not be totally ruled out: liberalization would presumably lead to across-the-board doping in elite sport, but not necessarily to higher health risks for athletes, since it would also permit better supervision and supply.

Match-fixing, whether to gain sporting advantage or facilitate gains from betting, has been present throughout the history of organised sport. But its prevalence appears to have increased sharply since the Millennium. The chapter links this greater prevalence to large increases in the liquidity of sports betting markets such that criminals can place larger bets and make greater profit from buying fixes from players. The problem is aggravated by much of the liquidity residing in illegal or barely regulated markets where sources of bets are essentially untraceable by investigators. Mitigation of risks from match-fixing would be achieved by large countries providing good-value legal and regulated betting facilities to deprive the illegal markets of liquidity. Since such reform is unlikely, sports need to address the willingness of their athletes to supply fixes. This requires improvements in sports governance as well as investment in prevention and detection programmes.

Whereas doping and match-fixing scandals dominate sports broadcasting, and scandals in international sport organisations like FIFA and the IOC are the subject of articles in both yellow press and quality newspapers, very little discussion on multiple club ownerships is going on. And even in academia only a very few publications dealing with the topic can be found. Exceptions are, e.g. represented by Weiler (Mehrfachbeteiligungen an Sportkapitalgesellschaften, 2006) using a judicial setting to discuss potential disadvantages or threats of multi-club ownership situations, Lammert et al. (Sport und Gesellschaft, 6(3): 202–233, 2009) analyse standing orders in German professional football, and Breuer and Kaiser (Critical issues in global sport management. London and New York, S. 64–76, 2017) focus attention on multi-club ownerships as one of several categories of manipulation in professional sports.

This contribution provides an explanation of ‘financial doping’ as a management concept in the context of European club football as well as on UEFA’s Financial Fair Play (FFP) regime, which can well be framed as the governing body of European football’s attempt to address this issue. The chapter is structured as follows: First, the historic development of financial regulation in European football is briefly outlined. The notion of financial doping as well as in what way it undermines the integrity of the sporting competition is addressed next. Afterwards, the FFP policy is explained, followed by a critical review of its discussion in scholarly literature as well as the presentation of an outlook on potential future research.

Financial regulation in sports is usually discussed in the context of representing an instrument against ‘financial doping’. Notwithstanding the merits of this discussion, this paper takes the opposite perspective and analyses how market-internal financial regulation itself may anticompetitively influence sporting results. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Sometimes, the actual winners and losers of financial regulation stand in line with the (legitimate) goals of the regulation like limiting financial imbalances or preventing distortive midseason insolvencies of teams. However, financial regulation may also display unintended side effects like protecting hitherto successful teams from new challengers, cementing the competitive order, creating foreclosure and entry barriers, or serving vested interests of powerful parties. All of these effects may also be hidden agendas by those who are implementing and enforcing market-internal financial regulation or influencing it. This paper analyses various types of budget caps (including salary caps) with respect to potentially anticompetitive effects. UEFA’s so-called Financial Fair Play Regulations are highlighted as an example. Furthermore, the paper discusses allocation schemes of common revenues (like from the collective sale of broadcasting rights) as another area of financial regulation with potentially anticompetitive effects. Eventually, the effects of standards for accounting, financial management and auditing are discussed.

The world we live in has changed immeasurably during the last quarter of a century. The role computers have played as a catalyst for this change in modern society cannot be overstated. Soon after the advent of the Internet came social media, which was followed by the dawn of the so-called era of big data, and all of this has happened in less than half a century since Bill Gates and his friends were toying with transistors and capacitors in creating what would eventually become Microsoft and Apple. The era of big data has meant that in recent times, the status of statisticians, analysts and “quants” has been elevated to such heights that interrogating data is now a core activity of mega-corporations like Google and Facebook. Financial markets have long used analysts to help gain an edge over competitors and better build portfolios which balance returns and risk, and so it is no surprise that another type of financial market, the global market on sports betting, is also employing statistics to gain an edge.

Never has the sport sector been under greater scrutiny globally for its shortcomings in dealing with key integrity issues: doping, match-fixing and governance corruption. This chapter will provide background on each of these areas, as well as setting out real-life examples of poor practice from the sector. Most importantly, the author will suggest, in reference to international legal texts and best practice, the potential ways in which all interested stakeholders in sport can better prevent, detect and remedy such threats to its integrity.

It is not surprising that, with so much money in sport, sadly, there is some corruption in sport, which may take many forms, including match-fixing. This is particularly true in association football—the world’s favourite sport and also the most lucrative one. For example, English Premier League footballers earn and are transferred for mega sums. We are living in the age when the likes of Wayne Rooney, when he was playing for Manchester United, reputedly earned £300,000 per week. As regards transfers of players, Paul Pogba, for example, was transferred from Juventus to Manchester United in the summer of 2016 for the record sum of £89.3 million! Sadly, however, many other sports are not immune from match-fixing and/or ‘spot fixing’ (a species of match-fixing) either, including the genteel sport of cricket.

With the revelation of the Fédération Internationale de Football Association (FIFA) corruption scandal in May 2015, the integrity and thus the general configuration of (international) sports organizations were publicly contested. The principle of moral behavior in international sports organizations (Arnold 1994) was clearly violated, and the high (self) esteem of sports suffered. The accusations of corruption regarding the Men’s FIFA World Cups (BBC 2015) as well as the bribing scandals during the Olympic bidding processes stained the integrity of sports. Sports values, also condensed in the concept of “Olympic spirit” (or “Olympism” (Adi 2014)), are based on the philosophy that best performances (should) lead to best results and rewards. This article deals with the concept of (good) governance in sports organizations, existing challenges and issues that have yet to be resolved. It lays out ideas for enhanced good governance through the example of mega-events.

Corruption in the processes required to host a sports mega-event has been common throughout history. This has often led to unnecessary costs that have ultimately been borne by the host government’s taxpayers. Little progress has been made in the prevention of such behaviour. In this chapter, we examine the history of corruption in sports mega-events, namely the Olympics and World Cup, to identify parts of the bidding and preparation processes that are vulnerable to illicit behaviour. We propose potential solutions to be implemented at various levels in order to prevent further corruption.

The Fédération Internationale de Football Association, universally known as FIFA, was the personal fiefdom of its president, Sepp Blatter, until 2015 when the United States Justice Department indicted dozens of FIFA officials for bribery and corruption. FIFA administers football, known as soccer in Australia and North America, and organizes its immensely profitable World Cup championship once every four years. Tragically, international football has been corrupt for decades, making Blatter and other males at the top wonderfully wealthy. Blatter’s 17 years as president has been characterized as a “neverending governance crisis.” FIFA’s most recent troubles began in 2010 when FIFA announced Russia and Qatar as the shockingly unlikely hosts of the 2018 and 2022 World Cups, a result widely believed to be the result of massive bribes. In response, Blatter announced a series of “reforms” which were actually an elaborate charade, an ongoing façade of Potemkinlike changes which made for good press releases. However, once Blatter’s successor as president, Gianni Infantino, took control, these reforms changed almost nothing. Football suffers in this way because, while FIFA is domiciled in Switzerland, it is best understood as a supra-national, stateless conglomerate answerable to no authority. This lack of accountability creates a moral hazard where football’s leaders enrich themselves with impunity, enjoying the many fruits of their perfect crimes. This will never be remedied from inside football. Although the proceedings brought by the U.S. Justice Department have secured 26 guilty pleas and verdicts, that effort is hardly a start at reforming football. Action by Switzerland and internationally is essential to reining in the “cesspit of corruption” at the world’s most popular sport.

‘Manipulation’ is a word capable of being interpreted in different ways, and the scope of this volume is therefore wide, with contributors defining the problem more or less narrowly than each other. But common to all is the understanding that manipulation involves some deviation from an idealised view of sport such that ‘the spirit of sport’ is compromised to enable one or more stakeholders to make personal or corporate gain. Organised sport of course likes to project itself in terms of its guardianship of an innocent world underpinned by the values which comprise that ‘spirit of sport’. For example, the World Anti-Doping Agency, (2015, p. 14) provides the rationale for its existence as being to ‘preserve what is intrinsically valuable in sport’, citing values such as ‘ethics, fair play and honesty’, ‘health’, ‘fun and joy’ and ‘respect for rules and laws’. Indeed, Lapham (Money and class in America: Notes and observations on a Civil religion. Weidenfeld and Nicolson, London, p. 151, 1988) argued that the projection of the sense of an innocent world is an essential part of the business of sport since it is so much part of the reason for love of sport. That of course presents a paradox. To an extent, sports businesses depend for their success on the population maintaining a belief in the spirit of sport; but their attempts to gain profit from sport may themselves be perceived as undermining traditional sporting values.