‘The fans of a football club constitute a community. This community of fans is a constitutive attribute of the club. It is part of the meaning of the football club as a resource. However, besides the cases of football clubs that are organized as members' associations, the fans rarely have a meaningful say in the running of the club. As the history of modern football proves, the interests of the fans in the club and in the continuance of their community often come under threat.’ Id. 217Though most fans would share the idea that modern football has robbed them of some of their say in club affairs, and would perhaps be able to espouse it as passionately if not so eloquently, Margalit’s innovation is in equating fan’s interests in their clubs to a pseudo-property interest utilizing a concept he calls ‘property as belonging.’ Id. 217. In this concept, property rights exist because by definition, ‘belonging’ is a term that exists both in the context of membership in a group and ownership of a thing. i.e. ‘I belong to a fan group,’ or ‘this club belongs to us.’ Margalit builds this connection on a foundation of a legal-realism conceptualization of property, which views property as a social institution whose aim is to serve social goals. Id. 220. This type of property regime prioritizes these goals based on the social context in which they exist, resulting in a nuanced concept of legal relations. Id. 220. In other words, property rights exist because society developed them to meet goals. And, there are contextual circumstances which exist that require us to view property rights and the relationships between parties impacted by those rights circumstantially. Thus far, based on the assumptions of belonging and a social context view of property rights, one can arrive with Margit to a simplified version of his conclusion that fans belong to a club, and the club belongs to them. But why, exactly, is it necessary to assign actual property rights to fans? Margit here points to the influential concepts of exit, voice, and loyalty described by Albert Hirshman. See, Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, Harvard University Press (1970). If consumers are unhappy with a grocery store, they can leave it and go to another. Typically they do not feel a strong connection and grocery stores can act as substitutes for each other. In economic terms, there is great elasticity between options. Another example would be gas stations. If a consumer typically goes to Mobil, and their local franchise has increased its prices to $0.10 over the Citgo a block away, the consumer feels no pain or frustration. She will simply go to the Citgo, guilt free. This is because, as mentioned above, there is great elasticity, and therefore, an increase in price by one competitor will typically lead to a rapid reduction in demand and increased sales to competitors. However, due to the very nature of fandom, elasticity does not exist. In Hirschman’s terminology, there is too much loyalty. Therefore, the very thing that makes fans, and being a fan, so special, dedication to their club, also reduces their ability to influence that club. Owners know that no one but the most superficial Manchester United fans would support Manchester City due to a ticket increase. A fan may go to less matches, or not buy as many shirts, but, up to a point, there will likely be someone to take their place at the ticket counter. Staying for the moment with examples of a Mancunian nature, Margalit points to the current situation at Manchester United as an example of when private ownership can, in his opinion, go bad:
‘The case of Manchester United is a good example of the weakness of informal voice. In 2005, U.S. tycoon Malcolm Glazer acquired control of over 70% of the club's shares, de-listed the club from the stock exchange and completed his takeover of the club by acquiring 98% of the shares. The British government professed its concern and urged Mr. Glazer to engage in discussions with the fans, but took no further action. Fans felt that they had been betrayed by the previous shareholders, who had allegedly seen the club merely as an investment. It was estimated that, in order to fund the purchase of the club, Glazer took large loans (a £ 265 million loan secured against the club's assets and another £ 275 million in loans), and the fans feared that they would be "expected" to pay for Glazer's borrowing. Initially, fans attempted to protect the club from Glazer by establishing "Shareholders United" -- a fan shareholders' association -- but to no avail. Later, fans expressed their resistance by calls for boycotting some of the team's games, not buying club merchandise and match-day programs, and not using catering facilities at the stadium. Some fans established a new "genuine" members-owned football club (FC United of Manchester) to play in a lower division, but most fans did not follow. The various plans of resistance were unsuccessful -- loyalty to the club and traditional habits of fandom prevailed.’ Margalit, 229.So, according to Margalit, due to the loyalty of fans and their lack of desire to exit and substitute, voice remains as the only vehicle to ensure that ownership sees them as stakeholders in clubs. He then works through some interesting ideas on how to accomplish giving fans a voice via some of the property regimes noted earlier. They include: members’ associations, minority co-ownership via shares, and social property interest. Members’ associations are put forward as the best possible option, as they, in Margalit’s mind, best embody the notion of property-as-belonging. Here, football clubs would be transformed into ‘…associations that would function internally as a non-market enclave while operating outwardly as a market entity.’ Id. 233. This structure is a democratic solution that gives every member a vote in large decisions of the club. This gives members a participatory, though not financial interest, in clubs. Margalit notes FC Barcelona and Real Madrid CF as two clubs with this type of structure. Id. 233. It is noted, however, that there can be issues with this property rights regime. First, there is an agency problem that exists when elected Presidents make decisions that impact the whole club. This is compared to democratically elected politicians and corporations with disparate shareholders. Id. 234. A related point that is not mentioned is how Presidents become elected under this structure, often after making wild promises with a great degree of improbability of coming to fruition. In fact, in many cases promises to sign star players if elected can even be seen as tampering with other clubs. Indeed, in terms of wild promises, Margalit’s analogy to actual politicians is as apt here as it is in his agency example. Margalit also mentions exclusion as an issue in the member association structure, as some fans may be unable to become members, and are therefore excluded from being heard. Id. 234. There is also the small matter of changing a team’s entire structure from a privately held entity, but Margalit believes that options such as public funding would enable fans to fund purchases to an extent that current owners would find it attractive to sell. Id. 234. Margalit moves next to a minority co-ownership structure. Although Margalit does not feel that this would be as successful a vehicle for voice as the above noted structure, he concedes that it would be more feasible given the current environment. Indeed, many clubs, both private and public, already claim some degree of fan ownership, so this structure is tried and tested. However, since actual ownership stakes are typically minority in nature, the actual impact that ownership may have for fans is muted at best, and insignificant at worst. Id. 234. The fact that outstanding share ownership by fans exists may also lead to an increased possibility of hostile takeovers, as a potential bidder may price shares so high that even the most die-hard owner would be hard pressed to hold out. Id. 235. Finally, a social property interest option is explored. This option is discussed in light of the pitfalls of actual minority ownership and in the likely case that transformation into member associations in unfeasible. This structure would see a division of interests between actual property owners and stakeholders where property owners would have claim to pecuniary interests in the club, and supporters would have moral or social ownership. Id. 236. Although Margalit clearly believes that a member association model is more desirable, he seems to defend the social property interest scheme more vigorously, possibly identifying that it is more feasible. However, he continues to concede that there are certain issues that would arise with this structure. First, he notes that the community of fans would need to be identified and clearly delineated, no small task in a world where large clubs unabashedly court fans thousands of miles and continents away from their home pitch. Id. 237. Secondly, he considers the best forum for expressing the collective voice of fandom, whether it be directly in the form of club meetings, or representatively in the form of a seat at the ownership table. Id. Finally, Margalit grapples with the idea of when the voice of the supporters would be mandatory, and comes to a conclusion that it is in those matters which impact the club and community so greatly that not doing so would be a high risk to said fans. Id. Therefore, things like manager appointments, and merchandising decisions should be handled by economic owners, while matters with the potential to endanger interests of core fans, such as stadium renovations, team color or symbol changes, establishment or closure of youth academies, or ownership changes would be impacted by the fans of the club. Id. 238. The end result of this type of structure, according to Margalit, would be that, ‘…the financial owner would still have an incentive to invest in the club, as this division still assures him fair potential to reap the economic benefits. At the same time, it would ensure that only the "right kind of investors" find football clubs to be an attractive economic activity -- namely, community-minded owners.’ Id. 238. Margalit concludes with the thought, ‘Current ownership structures of football clubs allow owners to engage in practices which may endanger the interests of the club as a whole, and, as a consequence, the well being and the continuance of the community of fans. If we view the fans as a constitutive component of the club, and recognize the merits of fandom as a community, not to mention cherish the world of football at large, it is necessary to take measures to ensure the best interests of both clubs and fans. As argued in this Article, the way to achieve this purpose is by means of the formalization of fans' voice in the running of the club, through a property entitlement.’ Id. 239. Special thanks to Alissa Fideli for her assistance on this post. Please visit soon for Part 2, my analysis of Margalit's conclusions.