Manchester City have reached a settlement with the Premier League over their associated party transactions legal case, much to the interest of Newcastle United.
Shortly after the Newcastle United takeover went through in October 2021, the Premier League’s rules regarding sponsorship deals changed.
Any deal must now be deemed fair market value by the Premier League, amid fears from the rest of the division that Newcastle United would agree inflated sponsorships through PIF-affiliated companies.
However, it was not the Magpies who took legal action. Instead, it was Manchester City. The case has now been settled, with the rules set to remain in place. However, there was an amendment to the rules in March 2024.
With the situation seemingly put to bed, Geordie Boot Boys have exclusively spoken to football finance expert Adam Williams to discuss how the APT rules came about and what this settlement means for Eddie Howe’s side.
Eddie Howe and Yasir Al-Rumayyan speak to each other after Newcastle United qualify for the Champions League.
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How Newcastle United kickstarted the APT saga
Given the wealth that PIF possess, there was fear throughout the Premier League that Newcastle United were suddenly going to blow everyone out of the water financially.
That is how this situation started, with Williams detailing the chain of events that resulted in Manchester City taking legal action against the Premier League over their APT rules.
“This saga dates back to 2021, when Newcastle were taken over by PIF and the fear among a certain bloc of clubs was that they would be able to use their network of associated businesses to sign artificially inflated commercial deals, thereby bypassing PSR,” he said.
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“The Fair Market Value requirement was extended to Associated Party Transactions (APTs), which meant that every deal they signed – be that a sponsorship or a new signing – had to be screened to ensure it was at a price commensurate with the industry norm.
“City successfully argued in the arbitration courts last year that some elements of the APT Rules were unlawful, so the Premier League was forced to rewrite those rules.
“Newcastle gave evidence in favour of Man City at the first set of arbitration proceedings, alongside Chelsea and Everton. On the other side, Arsenal, Man United, Liverpool, Tottenham and West Ham supported the Premier League’s position.
“But Newcastle didn’t go so far as to formally join City in the case against the Premier League, either in the second or the first arbitration. That surprised some people, but it was in keeping with PIF’s broader strategy of keeping their heads down at governance level more than was maybe expected of them.
“We do know that Newcastle had the value of one of their sponsorship deals – presumably their front-of-shirt partnership with Sela, a PIF-owned entity – was revised down by the Fair Market Value panel.”
What Manchester City settling with the Premier League means for Newcastle United
But what does it all mean for Newcastle United? Having made £86million in commercial income last year, the goal at St James’ Park is to increase revenue even further.
That would be easier with more relaxed sponsorship rules, but Williams states that Newcastle were never going to be given free rein to effectively do what they want.
While the 2024 amendment does help the Magpies, the way the situation has unfolded does not change things massively on Tyneside.
“There was a misconception that the overturning of the APT Rules could be the ‘end of the Premier League’ as we know it, but that was never likely to be the case,” Williams added.
“The new version of the rules introduced still had the Fair Market Value assessment. The changes were more centred around who has the responsibility to demonstrate fair market value, as well as the issue around interest rates on loans from shareholders to clubs. So Newcastle were never going to have carte blanche to strike a sponsorship deal at whatever price they like.
“There is no doubt that they have emerged as one of the winners from the whole affair because the new version of the rules give them some more flexibility, as well as disadvantaging some rivals to a certain extent in terms of shareholder loans. However, it isn’t the collapse of PSR or anything like that.
“The news that City have settled with the Premier League will probably be met with a little ambivalence from Newcastle’s board. On the one hand, they would have liked for them to get the changes to the rules that they wanted, such as the retroactive application of the rules on shareholder loans. But on the other, it wouldn’t have made a huge difference to them.
“And what’s more, this whole thing was costing every club money in legal fees, which the Premier League shares among its clubs.”
Manchester City chairman Khaldoon Al Mubarak applauds Pep Guardiola's team at the Etihad Stadium.
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Newcastle United and Manchester City owners are not allies
Manchester City and Newcastle United are both owned by sovereign wealth funds in the Middle East. In turn, they have both been on the same side of the APT argument that has been going on.
However, Williams insists that the APT situation does not mean that the Newcastle United and Manchester City owners are allies in all of this.
“A lot of fans presume that City and Newcastle’s owners must have an alliance because they are both sovereign wealth-backed entities from the Gulf,” he said.
“In reality, however, the UAE and Saudi Arabia are pretty intense rivals. That extends into every industry, including football.
“So while they will cooperate when their interests align, they aren’t going to work together out of hand. Wealth from the Middle East isn’t a homogenous blob like that. Quite the opposite, in fact.”