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Premier League Clubs Agree To Radical New Cost Controls

Piles of British PoundsWith a massive new TV contract coming into force next year, the 20 Premier League clubs are working hard to make sure that the £3B in additional revenue stays at the clubs, and is not handed over to the players via higher wages.

With that goal in mind the clubs have agreed, in principle, to introduce radical new cost controls.

One proposal is that clubs must break-even, and that their would be a rule and a cap on the amount clubs can increase their wage bills by each season.

These rules would mark a major change for the clubs, which made cumulative losses of £361m in 2010-11. Just last week, Manchester City announced a loss of £97.9m loss for last season.

No surprise then to hear that City were one of the two clubs to oppose any spending cuts. The other club to oppose these cuts was Fulham, and that is because Fulham chairman Mohamed Al-Fayed fears that any sort of salary cap would lower the value of Fulham if he decided to sell the club at some point.

I believe that the Premier League needs approval of only 14 of the 20 clubs in order to make the changes.

These sort of cost controls are something that the Premier League’s American owners are familiar with, as all the top American leagues have some sort of salary cap/luxury tax.

I just wonder how such a decision by the league would be viewed by the European courts? Should a business owner not be allowed to spend what he wants on his business/team? And if an owner fails to adhere to these proposed cost controls what are the penalties? Points deductions? Relegation?