Westham's subsidised use of the Olympic stadium could see a flood of cheap tickets engulfing south london
(This article first appeared in Trust News 8)
The London Legacy Development Corporation’s lawyer has the hump. Two years ago he thought the European Commission were waving through the deal which installed West Ham as tenants of the Olympic Stadium. Yet now he finds himself having to write 26 pages of answers to questions from the EC. And all because of some pesky football fans. Or as the EC prefers to call us , “concerned citizens”
His response was the latest outcome of an 18 month dialogue between the Charlton Supporters Trust and the EC about whether West Ham were in receipt of unfair state aid as a result of the Olympic deal. We started this because somehow the result of this “fair and open competitive process” had been predicted back in 2010 by the psychic duo Richard Murray and Peter Varney; and they had warned of the threat posed to Charlton by West Ham moving into the Olympic Stadium. The EC had already looked into similar deals with football clubs across Europe. We persuaded them to look again at this one.
Everyone who followed Charlton to Upton Park in 1991 knows what a huge barrier the Thames represented. You really didn't want to use the Blackwall Tunnel unless you had to. The Olympics changed all that. The Jubilee line had already connected the Peninsula to Stratford. Now we had the DLR reaching down into Woolwich and the high speed Javelin into North Kent - Charlton territory! As soon as football was mentioned as the solution to the Olympic “legacy” Murray and Varney saw the threat. West Ham were the only possible occupants. But there was no way they could fill a 50,000 capacity stadium. The transport infrastructure would enable them to offer cheap tickets, south of the river. In Charlton territory.
However that depended on the economics. If you are a business which can increase output by moving to a bigger site and building a bigger factory, you will only do this if your rental costs and building costs can be justified by increased sales. So the lower your costs, the more aggressive you can be on pricing to build demand for your increased capacity.
West Ham’s owners saw the opportunity. The future of the Olympic Stadium had not been thought through. Only football could regularly fill the higher capacity stadium on a regular basis. And only one football club had fans in the area who might come in numbers. Gold and Sullivan saw that they could get a new “factory”, with superb transport connections, for a silly rent. And best of all, get someone else to pay to kit it out to your specification. The taxpayer. Us ( how much do we pay? see box)
But the EU has rules about state aid – taxpayers’ money - being used to benefit one business to the detriment of others. Doubtless, some bright lawyers advised the politicians that the way to avoid infringing these rules would be to have a public tender. The problem with that is; if messrs Murray and Varney could predict in 2010 that West Ham would “win”, then why would a tender change such an outcome? Of course, it didn't change anything, and nobody was surprised.
But just because West Ham were the obvious tenants, no one could force them to bid and to move there. West Ham always knew that they held all the aces. The Government, and Boris Johnson were desperate for a “legacy”. But Gold and Sullivan did not need a new home for West Ham. They could dictate terms, because if anyone resisted, they could just say “OK we will stay at the Boleyn”. West Ham of course won the tender because there was no other credible competitor. But the tender could not force West Ham to pay a specific amount of money.
CAS Trust discovered that it is quite easy to engage with the European Commission on illegal state aid and we therefore felt that we should take the issue up. We did this without consulting CAFC. We could do this as private citizens supporting our Club, but not acting on behalf of our club who have from time to time to try to do business with West Ham. It is a template for how Supporters Trusts can help their clubs; clubs have to play the politics of the football business they exist in. We as Trusts don’t have to play that game. We are customers of football and we are citizens. We can use our rights as such to support and protect our club.
However we were naive about state aid. Twice we put in complaints, the first constrained by the webform on the EC website, the second more expansive. Both were rejected, but in the process we gained some insight into the position of the LLDC. We were surprised by the petulant and defensive tone their answer took. We also managed to get hold of the casework where the EC had ruled against five Dutch clubs. We learnt something important - the EC is interested in state aid which gives an entity an advantage against competitors in other member states. We knew that of the five Dutch clubs, only PSV had been regular European players. But the EC had rules that the smaller clubs could also affect competition if they got a helping hand, because they competed in the Europe wide transfer market, and could then get into European competition.
We argued that West Ham could never afford to build a new stadium like the Olympic with their own resources (and we used Arsenal as a precedent, both to show how a club had done it on its own, and to show the cost of such a stadium). We argued that West Ham were getting "a leg up" against all other FAPL clubs, but the biggest effect would be on those who fell into their enhanced catchment area: Orient, Charlton and Millwall. We asked the EC to show specifically how West Ham's case might differ from those of the Dutch clubs, if they failed to accept our demand for a formal investigation.
This time it went very quiet. A couple of times we politely enquired, and the EC assured us they were working on it. Eventually after nine months they came back to us; again they told us that they had no grounds for opening a formal investigation. However attached was a 26 page response from the LLDC. From this we could see that the EC not only forced them to answer our points, one by one, but the EC added their own, (and one of those questions and the answer, seems to have been redacted, without explanation).
We had also tried, using Freedom of Information rights, to get a copy of the rental contract between the LLDC and West Ham. The LLDC wriggled and squirmed in their attempts to avoid sending it. Eventually, clearly in breach of the law, they sent "it" but with every word and number of any use blacked out, on the grounds of "commercial confidentiality". We have now complained to the Information Commissioner about the response. This may take several months to work through, but the IC appear to be interested, asking us, in so many words, to "give us everything you've got on this matter".
However, despite the LLDC also demanding of the EC that we were sent a "non-confidential" version of their response (again redacting all useful numbers) we did glean two important facts about the deal from their response, which have not so far been made public
1. If they are relegated, West Ham pay a reduced rent (how much reduced, we currently don't know)
2.While they share revenue from match day catering, West Ham get to keep 100% of the revenue from executive boxes and hospitality, the capacity for which at the Olympic is huge. Murray and Varney have always argued that it was this revenue that Gullivan and Brady were really interested in, and they will be happy to give away match day tickets so long as they fill those boxes.
The LLDC response is, in our opinion full of holes (we will happily send copies of the response to Trust members on request). However from the narrow point of view of the EC, it doesn't constitute unfair state aid because the money lavished on the stadium refit does not flow directly to West Ham. The LLDC argue (and the EC seem to accept) that the Dutch cases were different because the clubs already occupied the stadia which were improved. Without expert legal research and resource we are unable to challenge this point and to take this further with the EC.
However EC rules are not the only basis for an argument in the UK that far too much taxpayers’ money has been spent on this refit, and nowhere near enough spent by West Ham. It is more a matter for London and national politicians. However Supporters Direct advised us to first of all try to get press coverage of the issue, and approach politicians once that coverage has been gained. Very quickly they connected us with a journalist on one of the national papers who has already been covering the story. It turns out that he lives 500 yards from the Valley and was readily able to appreciate the commercial threat to Charlton which, he agreed, had up to now not been covered. At the moment the plan is for him to await the findings of the Information Commissioner, since release of the rental contract may reveal further juicy details of just what a good deal West Ham have obtained.
We don’t argue that West Ham should not be allowed to play the Olympic Stadium. They are, in our opinion, welcome to it. We argue though that they should not get such a good deal that they can throw cheap tickets around in the Charlton catchment area because their operating costs under the deal are so low. Taxpayers’ money (our money) has been used to create a situation where Charlton are threatened by unfair competition from West Ham. We think this is the type of issue a Supporters Trust is set up to take on. We are sure that we will have more to report on this subject soon.
(Box1) Who funds the conversion of the Olympic Stadium?
Dept. of Culture Media and Sport: £37m
Dept. for Communities and Local Govt. : £25m
LLDC (including new overspend ): £73m
n.b . West Ham do not have to pay their share until they have sold the Boleyn Ground
(sources, Guardian, 22.10.14, LLDC submission to EC)
(Box 2) What we argued to the European Commission :
- Thanks to this deal using taxpayers’ money, West Ham are instantly one of the biggest clubs in England, and can bid for players at the highest level
- They could never have funded this stadium themselves.
- This amounts to unfair State Aid, as in the cases of five Dutch clubs
What the LLDC argued:
- The State money hasn’t gone directly to West Ham
- We had a free and open tender, what else could we have done?