50+1 Rule: The Bundesliga

“While the rest of Europe has boring leagues, half-empty stadia and clubs on the verge of bankruptcy, German football is in remarkable health.”

Former UEFA President Michel Platini’s words of praise for the Bundesliga at the 41^st DFB Conference are proof of Germany’s vibrant and sustainable football league, especially its first division, the Bundesliga.

This culture is the product of conscious efforts on behalf of the German Football Association (DFB – who govern German football), the Ligaverband (an association of the clubs playing in the Bundesliga) and the 2. Bundesliga (2^nddivision), along with its subsidiary the German Football League (DFL), which is responsible for operating the two leagues and the club owners (its fans). The fans ‘own’ their favourite clubs because of the acclaimed ’50 +1 rule’.

How clubs are structured throughout Europe

Until the 1990s most European football clubs were structured as member associations, formed by the fans. The club weren’t just involved in football, but several other sports as well and contained gym facilities, recreational facilities and were a place to socialise for the fans, much like how clubs in Brazil still are today. To incentivize private investments, most clubs began to restructure themselves in the form of private or public limited companies. 

In several cases, the football team of the club alone was converted into private companies, and the member associations would own a share of the newly formed company. While British clubs were generally incorporated as private limited companies, the Italian model too, was similarly liberal with most clubs being controlled by Italian businessmen. Initially, the French model was semi- conservative: There was a requirement for the member associations to own 33% of the private limited companies of the clubs to prevent the club from being absolutely controlled by foreign owners until the early 2000s. The Spanish government tried to change the ownership model through ‘Ley 10/1990 del Deporte’ in 1992, a law which made it compulsory for clubs to convert to private companies unless they could prove that they had turned a profit for the last 5 years, which allowed their biggest clubs – Real Madrid, Barcelona, Athletic Club Bilbao and Club Atletico Osasuna to continue to remain as member associations, with the clubs being controlled by ‘socios’, i.e. its body of members which is responsible for electing the board of directors and club president. 

In Germany the clubs began to convert their football teams into private companies but the DFB enacted the 50 + 1 rule in 1998 to prevent German football from getting taken over by private investors.

The Bundesliga 50+1 rule provides that if a company wants to own a share of a club they must get a sporting license, which is only issued if a majority of the club (50% plus one share) is owned by a member association.

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The rule explained

 This rule means that while the majority of the capital shares of the club may be owned by private investors, the majority of its voting shares are not. What does that mean? Fans control the decision making of the club.

This rule is subject to the exception, that if a private investor has invested substantially in a club for more than 20 years preceding 1 January 1999, the investor is allowed to own a majority of the club. The first two exceptions to this rule were Bayer Leverkusen and VfL Wolfsburg, set up by the workers at chemical company Bayer and automobile manufacturer Volkswagen respectively and are 100% owned by these companies. Martin Kind, owner of Hannover 96 challenged the rule before the DFB Court of Arbitration for unequal treatment of clubs. The court upheld his challenge as valid and those who invest substantially for more than 20 years in a club may now apply to the DFB for permission to control majority of the club. Since then TSG 1899 Hoffenheim and Hannover 96 have become two more official exceptions to the rule. Finally RB Leipzig is a club which has found a way to bypass the rule. While it is financed by Red Bull, rather than structuring themselves as a company, they structured themselves as a member association with all of its members being Red Bull employees, hence, the 50+ 1 rule would not apply. To prevent entry of more members they then set the membership fees at an astronomical 800 Euros. As a result, there are less than 9 members with voting rights. Despite these exceptions reducing the aura of morality around the German leagues, it is clear that the 50+1 rule has worked to a certain extent.

In March, 2015 new restrictions were imposed by the DFB which prevented an investor from owning more than 10% in one club and not owning stakes in more than 3 clubs. This rule would not apply to stakes acquired before March 4^th, 2015.

Benefits of the rule: The golden standard of football ethics

While the barriers to controlling clubs might disaude private investors from getting involved, this system has kept German football doing what it does best:

• Attendance
• Stable Finances
• Less Sportswashing

Attendance – The Bundesliga has the highest average attendance for any league in the world; over 40,000 per game for over 10 years. This is because the fans feel more connected to the club when they can influence its decisions. Arguably the second largest club in the Bundesliga, Borsussia Dortmund is a club owned completely by its members. It has also had the highest average attendance in the league for over 20 years, hovering near 80,000 spectators per game. A more fan integrating model has helped keep ticket prices lower than its European counterparts. The Bundesliga is the only league to still have standing stands in Europe, where a ticket costs around €10, far cheaper than the £30 ‘cheap seats’ at Old Trafford.

Stable Finances – A good mix of fan and private participation has helped German clubs to keep their debts low. It is a middle road, neither as commercialised as its European counterparts nor as noncommercial as Brazil’s clubs, which often find themselves in tough spots financially. Hence, although the revenue earnt by the EPL and its clubs is far more than that by the Bundesliga and its clubs, they turned a profit of €47m last year while the Premier League clubs suffered a loss of €207m. 

Lesser Sportswashing – Most Premier League clubs are owned by foreign investors, often countries with dubious human rights records. For example Manchester City is owned by Abu Dhabi and French Ligue 1 giant Paris- Saint Germain is owned by Qatar. The German league protects itself from acting as laundromat for human rights violators’ reputations. The league is so apolitical that even the sponsorship of clubs by entities such as Gazprom, (Russia’s state owned gas company which sponsors Schalke 04) wreaked enough havoc and prevented Schalke’s chairman and team from meeting Putin in 2013, while Qatar’s Hamad International Airport’s €1m sponsorship deal with Bayern Munich has drawn protests from fan groups such as Munich’s Red Pride amongst others.

While there are certain exceptions this rule to the rule has helped keep the ethos of football alive: That it is everybody’s sport. Critics might argue that the rule’s limitations do not adequately incentivize investors, German football is flourishing. The last time a motion to abolish the rule was put up for a vote, it failed 32:1. Perhaps it’s time the World sat up, took note and copied this rule, for football, for the love of the game.

Parth Mehta

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