Behind the scandals and the allegations swirling around the game of football, the real problem has been hardly discussed at all by commentators. At the heart of the problem is a basic matter of economics.
FIFA has a monopoly, and behaves much as monopolists usually do. The power and near-immunity from consequences of any cartel on this scale is such that the near-inevitability of abuse is hard-wired into the structure.
The axiom that “absolute power corrupts absolutely” is as true of economics as it is of government.
Much the same, unfortunately, is true of the national leagues, which function as price-fixing cartels, to the enormous detriment of the football-loving public.
In fact, elite football is a copybook example of how damaging monopoly can be, and why competition can alone protect the consumer. Though it seems unlikely that anti-competitive behaviour in football can or will be – err – tackled, the lesson which this teaches is applicable far more widely.
That lesson is that, whilst competition promotes the best interests of the consumer, monopoly and oligopoly do the opposite.
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The football world has been shocked, though seemingly not altogether surprised, by the investigations into FIFA, the governing body of the global game. Whatever the outcome where FIFA is concerned, it is to be hoped – though, sadly, not expected – that regulators will take a closer look at how the professional game more generally is structured.
Unfortunately, historical timing makes it unlikely that Adam Smith (who was born in 1723 and died in 1790) was a football fan. Otherwise, since he was born in Kirkcaldy, he might have supported Raith Rovers, which was not in fact formed until 1883.
But Smith’s strictures on cartels have remarkable applicability to football today. One of his most famous observations is that “[p]eople 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.”
On another occasion, Smith referred specifically to butchers, bakers and brewers, pointing out that it is not through the benevolence of these tradesmen, but through competition, that the interests of consumers are protected.
To appreciate quite how true this is, just imagine if all the bakers in the country got together into a cartel to control the sale of bread. The result, beyond a doubt, would be “a conspiracy against the public”. Prices would be fixed at high levels, and quality standards would very probably deteriorate as well.
In Britain, we had something not too far from this with the Corn Laws (1815-46), implemented by a Parliament of landowners to fix the price of wheat. Today, thankfully, the authorities would not allow something quite this blatant and this damaging to happen.
FIFA, on the other hand, has a near-total monopoly of world football. Ultimately, the real problem with FIFA lies not in dubious practices, or in the behaviour of individuals, but in its status as a global football monopoly. There is only one FIFA, and only one World Cup. So, whether you are a supporter or an advertiser, it is – so to speak – “the only game in town”, and is priced, accordingly, in a monopolistic way. In the absence of genuine competition, of course, influence – however obtained – becomes far more important.
Just as serious, where customers are concerned, is the way in which national elite football leagues function as blatant cartels, and it seems unarguable that the consumer – in this case, the football fan – suffers gravely as a result.
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In economic terms, the suppliers – that is, the football equivalents of Smith’s bakers, butchers and brewers – are the clubs. These clubs compete strenuously on the pitch, but as businesses they do not really compete at all. Instead, they are organised into leagues – which function as price-fixing cartels.
What ought to happen, if free market principles applied, is that each club would sell, independently, the television rights to its home matches, with sharing arrangements operating for the small number of games staged at neutral venues. The broadcasters could thus drive prices downwards by setting individual suppliers – clubs – against each other.
The cartelisation of football does not, unfortunately, stop there. The collective sale of broadcasting rights is restricted to two or at most three broadcasters, and rights to individual matches are sold as aggregates rather than separately.
Just imagine if the rights to each game were sold individually, and to at least two competing broadcasters – the cost of watching football would fall dramatically.
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None of this is going to happen, of course. The football industry would be vehemently opposed to the injection of competition in this way, arguing that its revenues would collapse.
Indeed they would, because the whole point of a cartel is to fix prices at artificially high levels. Of course, the clubs’ costs would collapse as well, because wages and transfer fees are themselves inflated by the monopolistic fixing of football’s income at artificially high levels.
Spare a thought here for the spectator, be he or she watching from the terraces, on television at home, or in a bar or pub. Even if nothing can – or rather, will – be done to get the ordinary fan a better deal, we should never forget that anti-competitive structures, not individual behaviour, are the real source of the ills in the game.
In this respect, football is no different from other aspects of the economy.
Competition is the best friend of the consumer.
Monopoly is his worst enemy.