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Brussels, 11th November 2003

Commission probes measures for professional sports clubs in Italy ('Salva calcio')

The European Commission has decided to ask Italy for information on two aspects of a recent national law on financial reporting by professional sports clubs including Serie A football clubs - in Italy. Firstly, the Commission is concerned that the legislation may breach European Union laws on accounting. Secondly, it may involve the granting of state aid. Both investigations are the first step in the relevant formal procedures and are without prejudice to a final decision on whether the measures under review do indeed breach EU law. If certain sports clubs are in effect being granted financial advantages over others in Europe, this distorts competition both in business terms - the area covered by EU Internal Market and competition law - and, by extension, on the field of play. The Italian authorities have two months to respond to the Commission's request: unless a satisfactory response is received within that time, the Commission may continue its infringement procedure, and ultimately refer the matter to the European Court of Justice.

Italy adopted at the end of last year measures on fiscal and accounting rules for professional sports clubs, (Decree Law 282 of 24th December 2002, converted into Law no. 27 of 21st February 2003). The effect of this law is that some clubs, especially major football clubs for which players' wages are the biggest outgoing, may be able to submit accounts which underestimate their true costs in a given year, hide real losses and give a misleading picture to investors, whose funds are placed at risk. A further side effect though this aspect is not directly covered by EU law - is that the clubs concerned may be able at least in the short-term to pay inflated prices and wages for players, even when their true financial position should not allow them to do so, thus gaining an advantage on the field.

In technical terms, the measure allows sports clubs to place in a special balance sheet item under assets the capital losses arising from the decreased value of the rights to exploit the performances of professional players, as determined on the basis of a sworn expert valuation. This item will be accounted for among the assets in the balance sheet and amortised over the years. The law specifies that companies opting for the special rules introduced by the law, must proceed, for accounting and fiscal purposes, to amortise the balance sheet item in ten yearly charges of equal amount, even if rights established by contracts with the players concerned last for, say, only two or three years.

The European Commission is concerned that the measure may breach both EU accounting rules and state aid rules.

The Fourth (78/660/EEC) and Seventh (83/349/EEC) Council Directives (Accounting Directives) on the annual and consolidated accounts require athletes' contracts, where treated as intangible assets, to be written off over their useful economic life, which generally would be the term of those contracts. The contract may not be written off over a longer period than the duration of the contract itself. In addition, the Accounting Directives provide that value attributed to fixed assets must be adjusted downwards to their real value on the balance sheet date if it is expected that the reduction in their value will be permanent. The Directives also set out the fundamental principle that financial statements should show a true and fair view of the companies' assets, liabilities, financial position and profit or loss.

Therefore the Commission has grounds to believe that the Italian law breaches the Accounting Directives by allowing athletes' contracts, which are treated as intangible assets, to be written off over a longer period than their useful economic life. In addition, the Italian law seems to allow sports clubs not to make value adjustments in respect of their contractual rights over professional athletes, even if those athletes have ceased to perform at the level expected from them, for example through injury. Financial statements presented in such a manner cannot show a true and fair view and depart from the prudence principle of the Fourth Directive.

Regarding the possible breach of Article 87 of the EC Treaty, covering state aids, the advantage granted could be qualified as a special depreciation arrangement, as defined in the Commission notice on direct business taxation. The arrangement may lead to the Italian State foregoing, in so far as certain sports clubs are concerned, tax revenues that are raised from other companies in equivalent underlying financial positions. There is thus a distortion of competition and effect on trade between Member States. Some of the activities performed by sports clubs clearly take place on international markets, for example the acquisition of players and the sale of broadcasting rights for European competitions like the Champions League.

If the measure does indeed constitute state aid within the meaning of article 87(1) of the EC Treaty, it is doubtful whether that aid is compatible with the Treaty.

The latest information on infringement proceedings concerning all Member States can be found at the following site:

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