Everton’s points deduction, explained: What they did wrong, and why it’s nothing like Man City

On Friday, a three-man independent panel convened by the Premier League opted to dock Everton 10 points for violating the competition’s profit and sustainability rules (PSR). Everton have said they will appeal the punishment and, in a written statement, said they would “monitor with great interest the decisions made in any other cases concerning the Premier League’s Profit and Sustainability Rules.”

This was a not-so-veiled reference to Manchester City, who are facing 115 charges of breaching PSR (to Everton’s one), and possibly Chelsea, who are currently under investigation for alleged wrongdoing between 2012 and 2019. Some suggest that the hard line taken against Everton means some sort of seismic punishment awaits City and/or Chelsea if they’re found guilty.

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Tempting as it might be to jump to the conclusion that if Everton get docked 10 points for one violation, then City would 1,150 points taken away for their 115 breaches, that’s not the way it’s likely to work. Why? Because there are very different charges in very different circumstances.

Here’s a Q+A to make sense of it.

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OK, what makes the cases so different?

Everton were charged with violating PSR rules for the three seasons ending with 2021-22. The maximum losses allowed in that period — after allowing for all sorts of adjustments based on COVID impact, youth development and other costs — were £105 million. The Premier League maintains their losses amounted to £124.5m, while Everton contend they simply accounted for certain payments differently and dispute the interpretation of some of the accounting practices. They also dispute the size of the punishment.

There’s no suggestion that Everton were wilfully dishonest or deceitful. Manchester City, on the other hand, are charged with failing to give “a true and fair view of the club’s financial position,” of failing to “include full details” of player and manager remuneration, and of failing to cooperate with Premier League investigators.

I don’t see how you can compare the charges in any way. Everton were profligate, took unnecessary and frankly stupid risks — like reportedly budgeting to finish sixth when, in fact, they ended up 16th — and in the view of the independent panel, they took some liberties with creative accounting, possibly in good faith. City, on the other hand, are accused of flat-out cheating with some of their charges. These aren’t the sort of things you hope to sneak past regulators, and they’re not errors you make in good faith. If proved, they’re on a whole different level.

It’s the difference between getting caught speeding, and getting caught speeding with some sort of radar jamming device in your car that allowed you to speed without getting caught.

Is that why UEFA banned City from European football for two seasons back in 2020?

Pretty much. And bear in mind: that was the maximum ban they could give and that was based only on a portion of the charges the Premier League are bringing against them.

But wasn’t the UEFA ban overturned on appeal? What makes the Premier League think their case is more solid?

That’s right: it was overturned by the Court of Arbitration for Sport, who found that “most of the alleged breaches were either not established or time-barred.”

Regarding “time-barred,” the Premier League is counting on the fact that unlike UEFA, there is no statute of limitations. When it comes to whether the breaches were not established, they’ll have to be able to prove their case and as we saw with UEFA, that may not be straightforward. In any case, City deny the charges and say they “welcome” the opportunity to clear their name.

What about Chelsea?

Again, very different. For a start, they haven’t been charged and, in fact, they turned themselves in to the Premier League and to UEFA, highlighting some of the irregularities for which they are under scrutiny, which mostly relate to undocumented, off-the-books payments to clubs and intermediaries.

Why would they blow the whistle on themselves?

Well, when Todd Boehly and the Clearlake consortium acquired the club from Roman Abramovich after he was forced to sell, they held back some £100m of the £2.5 billion sale price because, when they did their due diligence, they found irregularities and suspected they would be facing fines down the road. When those irregularities came to light, they reported them to the authorities.

Chelsea haven’t been charged yet, but based on what has come out in the media thus far, it doesn’t seem as if it’s on a similar scale to the City situation. And, more importantly, this was under the previous owner and the current owners flagged it up themselves.

It feels like over the past few years the Premier League has taken a renewed interest — and a harder line — on the financial dealings of its clubs. Why is that?

Well, the first thing to remember is that when we say “the Premier League,” we mean the 20 member clubs, not chief executive Richard Masters who, despite his name, isn’t some sort of Master of the Universe. The clue is in the name “profit and sustainability rules” — “sustainability” — and the goal is to run the league at break even, or close to it.

Why? Three reasons. First, if a club has huge losses — even with an owner writing a check every year — it drives the costs up for everybody else. That fullback who you were going to sign for £20m might now cost you £40m and instead of £3m in wages, he might want £5m in wages.

Second, no club is happy to weather huge losses (or rack up massive debt) forever and, if they suddenly pull the plug and go bust, there’s the risk of a chain reaction, with other clubs to whom they owe money also going bust.

Third, the Premier League likes to think of itself as a business, one that is stable and that will attract investors. If you make huge losses every year — it’s worth remembering that despite being the most successful league around, the Premier League makes an operating loss most seasons — it’s harder to attract investors.

So this greater oversight is a good thing, right?

Yes, except it does raise a whole bunch of ethical and legal questions that, frankly, I’m not sure the Premier League is equipped to deal with. Not yet, anyway.

Take Everton. The case against them was opened last season and referred to the three seasons before that — is it fair that the punishment be applied now? Shouldn’t the case have been adjudicated and the sanction imposed in 2022-23? That’s what the three clubs who were relegated in 2022-23 (Leicester City, Leeds United and Southampton) believe, which is why they’re reportedly mulling a lawsuit to seek compensation. In a perfect world, the Premier League would have done just that, but they said the judicial process couldn’t be completed in time.

Then there’s the whole issue of points penalties. Ten points is a nice round number, but its material impact depends on the club. Had Arsenal been found in breach and had they been docked 10 points last season, they would have finished fourth instead of second and still qualified for the Champions League. Had Fulham been docked 10 points, they would have finished 12th instead of 10th. Whoop-de-do. Some punishment, eh?

Then again, if Mark Zuckerberg drives his luxury vehicle 20 miles over the speeding limit and Joe Schmo drives his Honda 20 miles over the speed limit, they both get the same ticket and fine, right? It’s not as if we fine the billionaire more than the average guy in real life — except, of course, when our legal system says we can and judges have the discretion to do so.

And that’s Everton, which is relatively straightforward. What would you do, hypothetically, with City if they were found guilty of the most serious breaches? Strip titles? Mega-fines? Relegations? On what basis?

What of Chelsea, who are even more of a cluster-mess, because of the ownership change? Should we be thinking of these punishments as punishments for owners, in which case it probably wouldn’t be fair to throw the book at Boehly & Co. since they weren’t in charge? Or do we just make it about the club and if you happen to own it when past misdeeds are unearthed, tough luck?

If there’s a legal argument for compensation going to the relegated teams in the Everton case (not saying there is, but there might be), what would compensation look like if City and Chelsea are found guilty of the most serious breaches? And who would pay it? The league, for not having enough oversight? The clubs who broke the rules? Without a time machine, can you even properly compensate anyone?

Bear in mind too, that in all these cases — unlike in real life — there’s no significant jurisprudence, no precedents on which to base things. Which only complicates things further.

So, yes, oversight is good, but we’re far from figuring out the best way to make it work. And the impression is that the only folks who will benefit from this in the short term are lawyers who can bill more hours and legal scholars who can endlessly debate the questions above.