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1.
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Why a reference is needed to address concerns in
addition to those about competition
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1.1
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We understand that since 1979 the government has operated a
policy when considering references of mergers to the
Monopolies and Mergers Commission which has seen the issue of
competition as the predominant matter to be considered by the
Secretary of State in deciding whether or not to make a
reference. Nonetheless, the Secretary of State retains a broad
discretion to take into account matters of wider public
interest . Indeed, we understand that references have
continued to be made on other grounds where necessary; see Credit
I.yonnais/Woodchester Cm 1404 (1991).
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1.2
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In our submission this is a case where it is appropriate
that wider considerations should be taken into account in
addition to any adverse effect on competition. This is very
much a test case. It is clear that if this merger goes ahead
it will be followed by the take-over of other football clubs
by media/communications companies. Already, for instance,
Carlton have been linked to Arsenal and it is reported that
Tottenham are negotiating with ENIC who have strong links with
Time-Warner.
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1.3
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Football has been dogged by weak leadership. This problem
was specifically identified by the late Lord Justice Taylor in
his report on the Hillsborough Stadium Disaster (Cmnd Paper
962 at paras 51-58). The Football Association is supposed
to be the game's regulatory body. However, it has been
powerless in the face of demands from the top clubs and, in
reality, now largely acts as their spokesman. The directors
and chairmen of individual clubs, especially the larger clubs,
are more concerned with what is financially best for them
rather than the wider interests and future of professional
football.
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1.4
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We do not think it right that football should just stumble
into what are potentially far-reaching changes without a full
detailed investigation about their impact on supporters and
the future of the game. We believe there are a number of
matters of public interest which the Secretary of State should
consider in deciding whether to make a reference in addition
to matters of competition.
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2.
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Introduction and background
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2.1
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Football is not just another product like a soap-powder,
car or washing machine. It is part of our national heritage
and culture - the people's game. In the words of Lord Justice
Taylor in the Hillsborough report at para 10), "Football
is our national game. We gave it to the world." In 1990
it is estimated that half the population - 26 million people -
watched England play West Germany in the World Cup semi-final.
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2.2
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Football clubs started off as local community organisations.
Some clubs such as Everton, Aston Villa and Wolverhampton
Wanderers originated from church teams. Others were old school
teams, pub teams or works sides. Manchester United evolved
from a team of railway workers from the carriage and wagon
department of the Lancashire & Yorkshire Railway's engine
shed at Newton Heath.
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2.3
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In was not long, however, before these community based
clubs became limited liability companies. The impetus for this
change was the rise of professional players and the desire to
purchase or rent better football grounds. Clubs have
traditionally had a precarious position in English law in
relation to their ability to own property with unincorporated
associations having no legal personality at all. Limited
liability companies were the obvious answer.
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2.4
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The creation of limited liability companies brought with it
the danger of commercial exploitation. To prevent this the FA
imposed rules on football companies to protect and preserve
their sporting natures. Directors were unpaid, dividends
restricted and the grounds could not be sold off for profit.
Some of these provisions remain in place today in the FA's
Rule 34 (see Appendix 1). League football's communal character
was maintained by redistributing money from gate receipts,
sponsorship and television form the big clubs to the small.
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2.5
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The situation began to change in the early 1980's. In 1981
the FA allowed full-time directors to be paid and Martin
Edwards almost immediately became chief executive at Old
Trafford. The break-away of the Premier League, the ending of
redistribution of wealth in football, the public grants to
redevelop grounds in the wake of Hillsborough and the wealth
provided through exclusive television contracts all combined
to turn the major football clubs into lucrative investments.
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2.6
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The growing wealth in the top echelons of the game saw
increasing numbers of businessmen involving themselves in
football - not because of their support for their team - but
for personal gain. They sought to turn football from being a
sport into a business. The FA rules against profiteering in
football were neatly side-stepped by the formation of holding
companies - such as Manchester United plc.
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2.7
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This merger is a further significant development which
could see the end of football as we now know it in England. It
will mark the end of Manchester United as a independent
entity. Up until now the football club has been a largely self
contained operation. Even when it became a public limited
company the football club remained the core of the business.
This will not be the case once Manchester United plc become
just one small part of News Corporation's global media empire.
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2.8
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We submit that this merger and others like will have the
following detrimental effects on football supporters, football
clubs and football generally.
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3.
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a) the views of supporters will be further marginalised
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3.1
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Football supporters are part of the lifeblood of the sport.
Without the supporters to create the atmosphere the whole
spectacle of professional football would be gravely
diminished. Manchester United enjoy loyal and dedicated
support from large numbers of supporters. This support has
been maintained both in times of success and failure on the
football field.
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3.2
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The wealth of football clubs generally is largely generated
through supporters. They contribute through their payments at
the turnstiles, purchase of souvenirs, replica strips etc. and
through revenue generated by them watching the game on
television.
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3.3
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However, despite their importance, the views of football
supporters have largely been ignored by those who run the
game. This was expressly acknowledged by Lord Justice Taylor
in the Hillsborough Report at para 53 where he stated:
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"As for the clubs, in some instances it is
legitimate to wonder whether the directors are
genuinely interested in the welfare of their
grass-roots supporters. Boardroom struggles for power,
wheeler-dealing in the buying and selling of shares
and indeed of whole clubs sometimes suggest that those
involved are more interested in the personal financial
benefits or social status of being a director than of
directing the club in the interests of its supporter
customers. In most commercial enterprises, including
the entertainment industry, knowledge of the
customer's needs, his tastes and his dislikes is
essential information in deciding policy and planning.
But, until recently, very few clubs consulted to any
significant extent with the supporters or their
organisations."
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3.4
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Manchester United are no different from most clubs. Martin
Edwards has refused to meet the supporters organisations,
including IMUSA, despite numerous requests. No supporters'
representative sits on the board of either the football club
or the public limited company. No attempt has been made to
consult supporters about this proposed merger or obtain any
guarantees on their behalf.
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3.5
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We submit that the supporters views and interests will be
even further marginalised if Manchester United become simply
one part of the News Corporation Empire. We also believe that
this will be the case with supporters of other clubs who are
taken over in this way.
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4.
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b) the exploitation of supporters
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4.1
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Just as football is not just another commodity so football
supporters cannot be seen as ordinary consumers. By and large
football supporters do not change brands depending on quality
and price. Once you become committed you can never experience
the same emotions for any other side. Only when watching your
team will you feel the sense of anticipation prior to the
match beginning, the elation when they score a goal and the
despondency when they lose. Deep loyalty to clubs have often
been built up in families over many generations.
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4.2
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A report produced by the City analysts UBS entitled UK
Football plc: The winners take it all and cited by David
Conn in his book entitled The Football Business, 1997,
Mainstream Publishing says the following about football
supporters:
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"The football fan as a captive customer.
As a business, football enjoys a particularly valuable
and often brand-loyal customer base: the fans. Many
fans inherit their clubs from parents or friends or by
dint of locality, and as such become captive customers
(it is unlikely they will change their colours)."
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4.3
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A side-effect of this loyalty is that football fans are
ripe for exploitation. Recent years have demonstrated that
supporters will endure a great deal to continue to watch and
be identified with their team. The disgraceful remarks of two
of the directors of Newcastle United who were caught openly
bragging about their exploitation of supporters has not dented
fan loyalty to that club. Manchester United's support is
stronger than ever despite increasing commercial exploitation
of supporters including 14 new strips since 1992.
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4.4
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The main motivation of BSkyB in taking over Manchester
United is not love of football. Should the Restrictive
Practices Court rule against the ability of the FA Premier
League to negotiate collectively BSkyB want to preserve their
position by having control of the biggest club. They want an
important seat at the table in any future collective
negotiations including over a breakaway European super league.
As Raymond Snoddy and Jason Nisse explained in a recent
article on the merger (The Times 9.9.98),
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"BSkyB's prime purpose in buying United is as
an insurance policy to protect it's exclusive live
football. In January, the Restrictive Practices Court
will consider whether the Premier League is an illegal
cartel that cannot collectively negotiate television
rights. If the case were proven agreements between
BSkyB, the BBC and the Premier League could be struck
down and television companies would have to negotiate
with individual clubs. The Manchester United deal
subject to approval be shareholders and regulators
would at least give BSkyB the right to televised games
at Old Trafford. The insurance policy could also work
in the longer term. The BSkyB Premier League
television deal runs out in 2001 and after that a
number of clubs may be tempted to use digital
television to create their own football
channels."
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4.5
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The interests of Manchester United supporters are of a
secondary, if any, importance to BSkyB. We are concerned that
this merger will lead to them facing even greater exploitation
than is already the case. In particular,
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4.5.1
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watching football games at a stadium and on television are
a partial substitute for each other. As a result of this
merger BSkyB will obtain a monopoly over watching United home
games in both mediums. All things being equal, the mere fact
of common ownership of these partial substitutes could be
expected to see prices rising both for match tickets and
watching on television;
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4.5.2
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supporters will face still greater exploitation through the
costs of kit replicas/souvenirs etc.;
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4.5.3
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team selection could be determined not for football reasons
but to serve the commercial interests of News Corporation (see
further paragraphs 5.3.1 (i) and 6.4.1 in relation to this);
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4.5.4
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kick-off times could be subject to further considerable
disruption should News Corporation want to show live games in
other parts of the world including south-east Asia where they
have extensive television interests.
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5.
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c) The heritage and traditions of Manchester United
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5.1
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Manchester United are not just a business. Despite their
success and international support they like other football
clubs remain an integral part of their local community and the
heritage of the country generally. Particularly, since Sir
Matt Busby, Manchester United have become renowned the world
over for their flair and tradition of attacking, entertaining
football.
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5.2
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Football is a game of great drama and emotion which touches
many peoples' lives. The tragedy of the Munich Air Disaster is
indelibly written into history of the club and football
generally. It is the dying wish of many supporters that their
ashes are scattered on the 'sacred turf' at Old Trafford. As
the United Review stated in back in 1937,
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"'Manchester United' stands for something more
than any person, any player, any supporter. It is the
'soul' of a sporting organisation which goes on season
after season making history all the time."
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5.3
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We are concerned that once Manchester United loses its
independence and becomes part of the Murdoch empire then all
this will be jeopardised. In particular,
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5.3.1
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the interests of Manchester United could be sacrificed to
the overall commercial interests of News Corporation. Thus,
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News Corporation attaches great importance to
increasing their penetration of the Asian market. One
strategy they might adopt to achieve this goal would be to
ensure that United's first team includes popular Asian
players. Indeed, already there have been press reports
that representatives of BSkyB have been making enquiries
about Hidetoshi Nakata, the Asian footballer of the year;
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players could be sold to suit the interests of News
Corporations' global empire despite the adverse effect
this might have on the club. In 1990 Rupert Murdoch's
empire came near to global bankruptcy forcing them to sell
off large numbers of assets;
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there is currently no legal obligation for United to
negotiate with more than one supplier in relation to
broadcasting rights and it is unlikely there will be any
arms length negotiations with BSkyB who will be the
effective monopoly broadcaster of United's games.
Consequently, it is questionable whether United will
receive full value for these rights;
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it is likely that United will have any choice but to be
supplied by BSkyB with hardware etc. and, consequently, it
is again doubtful whether they will receive full value for
these products;
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If a European Super League comes to fruition it may be
in United's best interests to join but would BSkyB permit
this if they did not have the television broadcasting
rights.
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5.3.2
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that at some stage in the future the ground could be moved
to another part of England or even another country as has
happened with other sporting acquisitions by News Corporation;
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5.3.3
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the distinctive identity of the football team, including
the red and white strip, could be threatened if they conflict
with News Corporation's commercial interests.
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6.
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d). The impact of this merger on football generally
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6.1
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It is our submission that this merger warrants closer
investigation by the monopolies and mergers commission not
just because of its impact on Manchester United but because of
its wider implications for football generally. As stated in
paragraph 1.2 this is a test case.
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6.2
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Our concerns about the future of football are not fanciful.
In Australia, Rugby League was thrown into turmoil by the
intervention of Rupert Murdoch through his cable TV company,
Foxtel. In 1994 attendances were at an all time high and the
sport dominated the television ratings. Foxtel wanted TV
rights to attract subscribers to the company but they were
contracted to a rival company. Foxtel, therefore, decided to
try and establish a rival 'super league' by tempting more than
200 players to defect with huge salaries and cash bonuses. The
game was deeply damaged with poor TV ratings and attendances
becoming the norm in both leagues; see Hiltzik, The Los
Angeles Times, 25.8.97.
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6.3
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In Mexico, two media conglomerates own four of the 18 first
division clubs, all of whom are linked to one of the two
broadcasters that transmit every league and cup game. These
teams regularly swap players. They organise competitions and
play a part in arranging kick-off times. They determine who
will represent Mexico in international competitions. This is
not based on winning domestic trophies but viewing figures;
see Downie & Twain, The Guardian 12.9.98 at p29.
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6.4
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We submit that matters of concern in relation to football
include:
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6.4.1
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the impact on football of the major clubs becoming the
property of media corporations in terms of competition between
clubs. Sky Sports Managing Director, Vic Wakeling, has been
reported as saying, "What we don't want to happen in
English Football is perhaps what's happened in Scottish
Football. To take one example where Rangers won 9 titles in
row." (Piccadilly Radio 12.9.98). The commercial
interests of BSkyB in having a close competitive league with
different teams winning are not the same as Manchester United
who should want to win all the time.
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6.4.2
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the impact on kick-off times to suit the schedules of media
companies. The advent of clubs being owned by television
stations could see football becoming almost continuous as they
seek to avoid other big matches which might damage viewing
figures. Already live televised football can be seen virtually
every night of the week;
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6.4.3
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the impact of the development of a few super clubs on
smaller teams and the lower league. Hopes of smaller teams
rising to the top are already increasingly remote. They will
become non-existent, particularly, if a European super league
is established with no automatic promotion or relegation. This
could harm much of the romance of football.
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6.4.4
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undoubtedly, this merger will bring forward to likelihood
of a European super-league. However, there has been no
consultation as to whether this is what football supporters
want or whether it will be good for the game generally;
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6.4.5
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the impact of this and other mergers on football finances.
None of the money which will be paid by BSkyB will go to
benefit the football club. Instead, it will go to the
directors and shareholders with Martin Edwards, alone, gaining
a reputed �80 million in addition to the �33 million he has
already obtained from previous sale of shares;
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6.4.6
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FA rules currently prevent anyone owning more than 1 club.
However, now football is becoming big business this rule may
constitute an illegal restraint of trade and be unenforceable.
If so, BSkyB could buy further clubs raising serious questions
of conflict of interest and about the running of the game
generally.
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7.
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Conclusion
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7.1
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In our submission all these matters warrant full and
independent consideration by the monopolies and mergers
commission as part of their investigation into this merger
given the importance of football within our society.
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