Does the European Super League break the rules of sporting economics?

We’re told the motivation for the formation of a “European Super League” is greed. But is it also free market economics?

The proponents of the breakaway league, and their financial backers, are clearly confident it would generate significantly larger broadcasting and sponsorship revenues than the current arrangements.

Why? Because the new format – with some of the strongest squads in Europe playing against each other on a regular basis – is, we’re told, what football fans would prefer to see and, crucially, would pay more to watch.

One of the documents laying out the case for the formation of the league, according to the Financial Times, asserts it would deliver “the best product on the pitch”.

There is also an argument, made implicitly by the unilateral behaviour of the clubs involved, based on economic freedom.

The clubs which have joined together to form the new league are private concerns. Their players are also free agents, able to decide which club in the world they wish to play for and at what price.

If they wish to establish their own competition, what right has anyone – leagues, national or international football administrative bodies, or governments – to interfere?

This, then, is the free market in action.

Most football fans understand the flaws in this argument – as evidenced by the almost total lack of support for the Super League among supporters, even among the clubs who would nominally benefit.

Yet it’s worth exploring why the kind of economic logic outlined above is questionable.

First of all, and most glaringly, the structure of the proposed league, with its reserved places for “founding clubs”, is manifestly anti-competitive.

This is the equivalent of designing an internet search algorithm so that the same retailers’ wares always appear at the top of any results, even if more people are buying from other retailers.

This is not a free market but a cartel, acting collectively to safeguard its own financial interests.

The documents that emerged last year state the league would be “structured, operated and governed so clubs can be financially sustainable over the long term”.

What this is saying is that the member clubs are seeking high and guaranteed revenues – they want to eliminate the risk of financial shortfalls as a result of failure to qualify for the existing and lucrative Uefa Champions’ League through a weak performance in domestic leagues.

But the price of their “sustainable” finances, would be paid by other clubs across Europe who would not be in the privileged league as of now – and could only hope to qualify for one of the few temporary places.

And given the money that would flow to the permanent members, this is a system which would entrench their already formidable market power over time.

They would enjoy a virtuous (for them) circle of higher revenues, additional money to buy the best players, more success on the pitch, resulting in higher revenues.

The father of free market economics, Adam Smith would have recognised the kind of secretive behaviour that has resulted in this project materialising.

As he wrote in The Wealth of Nations in 1766: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

The share price of two of the stock market listed clubs in the group, Manchester United and Juventus, spiked on confirmation of the breakaway plan – precisely what one would expect in response to the prospect of a successful cartel being formed.

Cartels can be found in other sports leagues, notably American football.

The roster of 32 top teams in the National Football League (NFL) is fixed forever, meaning none can be relegated.

Yet this is counterbalanced by a redistributive system whereby the weakest teams at the end of one season get the first chance to pick the most promising young players coming through to the senior level at the start of the next season.

In the NFL there is also a hard annual cap on the total amount that any team can spend on players’ wages to prevent wealthy owners injecting in their own money to buy up all the best talent and distorting the competitive balance.

What these economically redistributive mechanisms in the NFL reflect is an acknowledgement of the fact that the “product” is the league, not the individual teams and that competitive imbalance would undermine the value of the product.

There are reportedly some expenditure control mechanisms proposed in the new European Super League – but nothing on the scale or scope of those in the NFL.

Indeed, given some of the clubs involved have built their success and status in recent years by spending their billionaire owners’ external wealth on the registrations of the world’s best players this is not something that they would be likely to readily accept.

There are some who argue that if the new league is genuinely unpopular with fans (and not just fans in Europe) it will fail commercially because they will stop watching or buying tickets.

The market, then, will decide.

But what this misses is the fact that football teams are not like conventional consumer products. Many fans (although admittedly not all) cannot switch between teams like they can between different brands of washing powder. They constitute a captive audience.

The magnetic pull of history and loyalty might make it impossible for fans to vote with their feet and boycott games, which is why there is serious talk, instead, of bans on clubs that take part in other competitions and even legislation to prevent it.

It would be ridiculous, of course, to deny that elite football is a business. The formation of the English Premier League and the globalisation of the sport’s broadcasting appeal in recent decades has transformed its finances and indeed its economics.

Yet it remains a very abnormal business. It is socially and community-embedded in a way that few other industries are.

The marketisation, commercialisation and inequality of modern football has been broadly tolerated by the majority of fans until now. The question is whether the owners of these clubs have, finally, pushed it too far.