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The Premier League’s Inconsistent Financial Rules Strike Again

A general view of the Nottingham Forest logo on the side of the stadium ahead of the Premier League match at City Ground, Nottingham. Picture date: Friday December 15, 2023.
Nick Potts/PA Images via Getty Images

On Monday, the Premier League handed down its second points deduction of the season, this time hitting Nottingham Forest with a four-point penalty for "a breach of the Premier League’s profitability and sustainability rules" (PSR). Both the club and league can appeal the ruling, which was handed down by an independent commission, though the league has set a deadline of May 24 for any appeal decision, according to The Athletic. The deduction drops Forest down into 18th place on the table, one point away from safety from relegation.

After Forest admitted to a financial loss of £95.5 million in the three-year period that ended last season (£34.5 million over the threshold of £61 million in loss), the independent commission convened in January to determine the penalty. The starting point for a deduction is three points, and Forest was hit with an additional three due to the "circumstances and scale of the admitted breach." However, the club was then given back two points for "mitigating" factors, which included an early plea in the case as well as "exceptional cooperation" with the investigation.

Since earning promotion to the Premier League ahead of last season, Forest has spent roughly £250 million on transfers, a hefty sum for a recently promoted team. (Consideration for the punishment was given to the club's sale of Brennan Johnson to Tottenham in September of 2023, which brought in £47.5 million.) Since the club spent two of the three years under review in the Championship, the club was subject to that league's £61 million threshold, rather than the £105 million deficit Premier League sides are allowed. Combined with that transfer sum, it's not particularly surprising that the club found itself in violation.

What is surprising is how vague the punishments are. Let's take Everton's 10-point deduction—later reduced to six on appeal—as a recent example. The Toffees were found to be £19.5 million over the Prem's £105 million threshold, but its penalty was 10 points; six were given for the same reasons as Forest, but four more were added due to what was deemed as the club's bad-faith cooperation with the investigation, especially in relation to loans for its new stadium. Those four points appear to be the ones that were removed on appeal, bringing Everton back down to six, the same as Forest's before the latter club's cooperation was taken into account. Why is this all so confusing?

Well, that's where the Premier League's lack of clear guidelines for penalties comes into play. It's up to the commission to assess a club's level of cooperation, and the subjectiveness there can lead to inconsistent punishments. That the initial rulings for Forest and Everton were so different, by a margin of six points, means one of two things: 1) Forest approached the investigation more thoroughly than Everton, or 2) the rules are applied at the whim of each independent commission, with no defined set of rules for what constitutes cooperation.

It appears that said cooperation tangent isn't laid out clearly enough to standardize punishments. If Forest had cooperated more, would the "mitigation" clause lead to more points being removed from the penalty? If Everton had cooperated less or been more brazen in its lying, could it have received a larger penalty? This ambiguity, for a league the size and wealth of the Premier League, is nigh unacceptable.

Confusingly, there is also another guideline that was actually ignored in both cases. Premier League chief executive Richard Masters reportedly told the commission that, in Everton's case, the league had come up with a formula in which six points would be the standard for a breach, and then another point would be added for every £5 million over the threshold. The commission essentially told the league that it would not be using that formula, and it was right to do that; the sanctions policy is not published anywhere, and that's just too much ambiguity to throw out during the sentencing process, at least according to both commissions.

Both clubs, entrenched in the lower third of the league table, will also feel aggrieved by the perceived targeting of their deductions. This is because of how Manchester City's situation looms over any and all financial punishments. The league charged the defending champions with over 100 financial violations last February. Compared to Everton's and Forest's one measly breach, City's much more substantial infractions have the makings of a major scandal. Perhaps the league is getting all of its ducks in a row before bringing down the hammer on City, but it's conspicuous that the Sky Blues continue to play (and win trophies) with no punishment more than a year after being charged, while two bottom-half sides get hit pretty rapidly with deductions. Also, what is the league going to do about Chelsea, another marquee side with potential violations of its own?

These questions have no answer for now. Meanwhile, Forest's fight against the drop has become that much more difficult following the deduction. In its statement on Monday, the club pointed to its status as a newly promoted side as the main reason for its spending over the PSR threshold, and it's a sensible point. Premier League clubs are filthy rich. For a side coming in from the Championship, it's only logical to believe that the only way to compete is to spend as much as is possible. On paper, Forest did exactly what it had to do; it just did it too much.

I don't agree with the club's conclusion that it should have avoided punishment for this reason, but I do agree with the sentiment behind it. When clubs like Manchester City are able to spend billions, and certainly millions over what the rules say and in manners that skirt legality when they are not spitting in legality's face, how is a Forest-level side supposed to keep up? The Premier League originally sought an even bigger punishment for Forest; according to the club's statement, the league wanted an eight-point deduction, which it notes is only one fewer than the penalty for club that go into insolvency. (Where this eight-point deduction came from, I surely don't know; by Masters' testimony, the league could have sought a 12-point deduction, given that Forest was over its loss threshold by so much money.)

The messaging behind the league's approach here is clear: Clubs can spend money, but not above their means. What's less clear is what the league hopes to achieve with punishments such as this one, or Everton's, or the potential second penalty Everton might see this season after an investigation found additional PSR violations. If it's to level the playing field between the rich clubs and those with more modest means, relatively speaking, it is failing in a cloud of nebulous regulations.

[Correction, 5:15 p.m. ET: Brennan Johnson was sold to Tottenham in September of 2023, not January. This has been corrected above.]

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