Changes to HFSS

In October 2022, the UK government introduced rules restricting where less healthy food or drink (also referred to as high fat, salt and sugar food and drink (HFSS)) could be located in stores and online, including aisle ends, check out and self-service points, as well as digital advertisement and apps.

From October 2025, the UK government will go further to include limitations on the promotion of the sale and advertisement of HFSS food and drink.

How could it impact your business?

The Advertising (Less Healthy Food Definitions and Exemptions) Regulations 2024 (“the Regulations”) set out that ‘less healthy’ food or drink is within scope if it falls into one of the 13 product categories set out in the Schedule to the Regulations and scores 4 or above for food, or 1 or above for drink when applying the nutrient profiling model.

The restrictions will apply to all businesses involved with the manufacture or sale of ‘less healthy’ food or drink with 250 or more employees (including franchises), who pay to advertise HFSS food or drink.

TV and online advertising of HFSS products
Previously there was a restriction under the UK Advertising Codes on the advertising of HFSS products during children’s TV programmes. The new legislation further extends this restriction to prohibit all less healthy food or drink products being promoted on television and on on-demand services prior to the 9pm watershed. It also introduces a total ban on paid-for online HFSS advertising and a restriction on advertising on social media platforms, along with further restrictions as to paid advertising and gifted products (influencer advertising).

OFCOM will be the regulator with primary responsibility for the changes, however the ASA has been designated as having day-to-day responsibility for ensuring advertisers comply with the terms of the ban. It is, however, noted that such restriction would not impact brand advertising, rather targeting identifiable HFSS products.

Volume sale promotions of HFSS products
Under the new legislation, the purchase of large quantities of HFSS food and drink will be prohibited. This includes things such as:

• multibuy promotions

• buy-on-get-one-free offers

• the promotion of a HFSS product alongside a non-HFSS product

• gaining loyalty points on multiple HFSS products; or

• free refills of sugar-sweetened beverages in the out-of-home sector

This restriction does not include normal discounting of a HFSS product, for example, temporary price cuts such as 20% off a HFSS product or price promotions for meals in the out-of-home sector, for example, 2 courses for £12 or kids eat free.

What steps should you take?

Clients should review existing advertising and discounting practices to ensure compliance with the new rules. Businesses affected by these changes have until 30 September 2026 to sell any existing stock with promotional packaging. However, the government is encouraging retailers to invalidate on-pack promotional offers prior to this deadline and food and drink brands will not be able to print new product packaging bearing non-compliant promotions from 1st October 2025.

Failure to comply with regulations relating to volume sales of HFSS products may result in a business receiving an improvement notice, with the potential that this is escalated to a fixed monetary penalty if non-compliance continues.

Changes to the Commercial Agents (Council Directive) Regulations 1993

We previously reported on the proposed changes to the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) which apply to agency arrangements, introducers, marketing agents, purchasing agents and sales agents, their purpose is to provide consistent protection for agents.

The Government had stated that deregulation would simplify the legislative framework in the UK and allow businesses to enter arrangements more easily. Industry opinions on its proposals were requested, with the consultation including a prescribed set of questions which it is asking participants to review and respond to.

Following the consultation, the Government have confirmed the Regulations are to remain in force unamended.

How could it impact your business?

Whilst the consultation responses from commercial agents and principles were polarised, the overall view was that the Regulations work well for commercial agents and are well understood. Some principles argued that the Regulations impaired their ability to freely negotiate. However, whilst the concerns were acknowledged, they were not found to be reason enough for deregulation.

What steps should you take?

If a business has delayed in entering agency agreements, or put in place interim arrangements such as a short-fixed term contract or building in suitable termination rights, it should review these termination rights and/or proceed to formalised its agency agreement as normal.

Digital Markets: what does the DMCC mean for customers and competitors of big tech platforms?

The Digital markets sections of the Digital Markets, Competition and Consumers Act (DMCC) came into force on the 1 January 2025. Two weeks later, the Competition and Markets Authority (CMA) launched its first investigation under its digital markets powers, focusing on Google’s search and search advertising activities. The second investigation came hot on the heels of the first (this time into both Google and Apple for mobile ecosystems), with a third (most likely into cloud services) expected late this year.

This new regime brings opportunity for challengers and customers of big tech companies to have their voices heard and shape the evolution of digital regulation by engaging in SMS investigations.

How could it impact your business?

The DMCC, unlike the DMA, is built upon flexibility. Rather than imposing a uniform set of requirements, the DMCC instead features a consultative process where the regulator liaises with entities that are subject to designation (known as firms having Strategic Market Status “SMS”) and engages in public consultation to formulate a bespoke set of conduct requirements, which aim to target market distorting pinch-points in relation to a specific digital activity.

Whilst conduct requirements must fall into one of the 13 permitted types outlined by the DMCC, the drafting on these permitted types is deliberately broad and leaves substantial room for interpretation. Key examples include:

• Trading on fair and reasonable terms (without providing a definition for what may be considered fair or reasonable);

• Preventing the designated entity from carrying on activities other than the relevant digital activity in a way that is likely to materially increase the undertaking’s market power; an

• Preventing the unfair use of data.

As the conduct requirements in the CMA’s arsenal are extensive and broad ranging, challengers to these entities are presented with a real opportunity to shape the regulation of the dominant entity active in their marketplace. Similarly, customers of tech giants (read: most businesses), interest groups, and trade associations are able to feed into the consultative process to somewhat level the playing field.

Public Consultations and CMA Engagement

As set out above, when deciding whether to designate an entity, the CMA will engage in an information gathering exercise, utilising both mandatory and voluntary information gathering procedures. For entities that receive direct contact from the CMA, responding to information requests is mandatory and parties should seek advice on how best to frame any responses to the CMA, including in relation to confidentiality. Failure to respond may result in significant fines. Whilst organisations may be apprehensive about the contents of submissions to the CMA, with appropriate advice these submissions can be a strategic tool to ensure effective regulation of competitors. For example, Google recently took aim at Microsoft for its anti-competitive practices in the cloud market which has undoubtedly boosted the profile of the CMAs market-wide investigation of the cloud market and will be pivotal in the regulation of this rapidly evolving market. Moreover, for entities at risk of designation in the future, the request for information provides parties with the ability to feed into the regulation process, setting important precedent for future designations.

In addition to mandatory requests for information, the CMA also published an invitation to comment, allowing any third parties to make submissions to the CMA regarding a designation decision and any associated conduct requirements. Whilst these processes are voluntary, they are a useful opportunity for customers and other third parties to engage with the regulator on their experiences dealing with a designated entity. However, organisations must act fast as designation investigations are fast-moving and parties often only have a few weeks to draft and submit responses.

In addition to reactive measures in response to CMA investigations, the CMA has openly welcomed submissions from third parties seeking to invite the CMA to examine a potential SMS in the marketplace. For challengers, this represents a unique opportunity to invite the CMA to consider designating a key competitor.

Private Enforcement

As the regime matures, we will likely see both public and private enforcement actions in relation to the digital markets regime. In the private enforcement sphere, we can expect to see more typical follow-on actions for damages once the CMA has found an infringement. Such actions do not require the claimant to prove the fault of the SMS firm and instead focusses solely on the loss suffered by the claimant.

The UK has also experienced a boom in stand-alone actions in the private enforcement sphere over the last decade and this enthusiasm is only set to increase with the introduction of the digital regulation regime. Stand-alone actions allow those impacted by alleged infringements of conduct requirements to secure compensation without being restricted by the resource restrictions associated with public enforcement.

What steps should you take?

Customers and challengers alike should keep a close eye on the evolution of the digital regulation regime under the CMA. The introduction of the DMCC is a watershed moment for competition law, and entities engaging with the regime have an invaluable opportunity to shape the direction of travel. Failure to actively engage in the regime, leaving larger organisations to respond, risks the regime evolving in favour of those same organisations.

Companies House postponement of ACSP verification service

Companies House has postponed the launch of the service for individuals or organisations to register as an Authorised Corporate Service Provider (ACSP) with no new date for the service being confirmed. The service was meant to be rolled out to those who undertake anti-money laundering supervised activity, such as company formation agents, solicitors and accountants on 25 February 2025.

Under The Economic Crime and Corporate Transparency Act 2023 all new and existing company directors, individuals and relevant legal entities who hold significant control over a company (e.g. those who own more than 25% of shares or voting rights) (PSCs) will eventually need to verify their identity at Companies House. The verification process and requirements will be rolled out in stages and undertaken by either Companies House or an ACSP.

How could it impact your business?

The impact of this is that potential ACSP’s cannot start the application process, throwing into doubt whether they will be able to perform the verification checks for directors and PSCs come 25 March 2025, which is the date whereby voluntary verification will be possible. This also raises questions over if the voluntary verification process for directors and PSCs will be launched as planned.

What steps should you take?

Due to the lack of clarity over timings from Companies House it is not known what effect this postponement will have on the overall implementation of the verification process. However, there is no need for panic. The compulsory verification of new directors and PSCs is not planned until autumn 2025 and therefore there is still plenty of time for resolution and clarity to be sought.

At present Companies House has confirmed:

• From 25 March 2025, individuals will be able to voluntarily verify their identity directly with Companies House or an ACSP;

• In autumn 2025, the identity verification will become mandatory for all directors and PSCs on new incorporations; and

• From autumn 2025, a 12-month transition period will begin for directors and PSCs of existing companies to complete the process.

Changes to the ICO’s data protection fee

Most UK businesses are required to pay an annual data protection fee to the Information Commissioner’s Office (ICO), the UK’s data protection regulator. The fee payable depends on the size of your organisation. With effect from 17 February 2025, the fees have increased to the following:

• Tier 1: Micro organisations (with a maximum turnover of £632,000, or no more than 10 members of staff) = £52

• Tier 2: Small and medium organisations (with a maximum turnover of £36 million, or no more than 250 members of staff) = £78

• Tier 3: Large organisations (who do not meet the criteria for tier 1 or 2) = £3,763

This is an increase of around 30% and follows a consultation led by the Department for Science, Innovation and Technology last year.

How could it impact your business?

In light of the new fee structure, it would be prudent for all businesses to check that they are up to date with their data protection registration and that they are paying the correct fee for the size of their business.

The ICO offers a self-assessment tool to help you work out whether a data protection fee is payable (there are some limited exceptions) and what the relevant fee is. The easiest way to pay is by direct debit and this method attracts a £5 discount.

What steps should you take?

You can check whether your business is up-to-date with registration and payment of the data protection fee by downloading your registration certificate here. For businesses who have already registered and paid under the old fee structure prior to 17 February 2025, no further action is required and the new fee is applicable only from the next renewal.

It is illegal not to pay the data protection fee if you are required to do so, and the maximum penalty is a £4,350 fine.

Of course, payment of the data protection fee is only one small aspect of data protection compliance and there are lots of other requirements to consider. We recommend that businesses review their policies and practices at least annually to ensure that they remain up-to-date with the latest guidance and requirements, so this is perhaps also a timely reminder to think about doing a spring clean of your data protection compliance regime.

Freedom of expression of protected beliefs (Higgs v Farmor School)

The recent case of Higgs v Farmor School concerned the expression of religious beliefs in the workplace. Mrs Higgs was dismissed from her employment at Farmor’s School after she has posted comments on Facebook which criticised the way same-sex marriage is taught in primary schools. When dismissed, Mrs Higgs brought claims of discrimination and harassment for direct discrimination, asserting that the expression of her beliefs was a direct extension of her Christian faith.

The Court of Appeal recently decided that where an employee is dismissed merely because they have expressed a religious or other protected belief, to which the employer objects, this will constitute unlawful discrimination under the Equality Act.

How could it impact your business?

There is very little scope to discipline or dismiss an employee for expressing a particular protected belief which meets the following criteria:

1. The belief must be genuinely held;

2. It must be a belief and not simply an opinion;

3. The belief must be a weighty and substantial aspect of human life/behaviour;

4. The belief must attain a level of seriousness and importance; and

5. The belief must be worthy of respect in a democratic society and comply with human dignity and the rights of others.

Additionally, the grounds for objecting to such a belief and the way they are expressed are heavily regulated, particularly if they form part of an employee’s outside of work life/social media. You should therefore ensure that any decision to dismiss an employee is objectively justifiable, not simply because you consider the view to be objectionable. The bar for establishing justiciability is incredibly high when the expression is that of religious or cultural belief.

What steps should you take?

Employers need to update their policies and training so HR managers understand that a decision to dismiss following the expression of a protected belief has to be objective and proportionate. You should proceed with caution when deciding to dismiss an employee who has expressed a protected belief, particularly where such an expression is made via social-media or outside of work.

Exhausting the grievance process (Nelson v Renfrewshire Council)

In a recent case, Mrs Nelson (the Claimant) was a teacher and employed by Renfrewshire Council. The Claimant alleged that the head teacher was aggressive and intimidated her following a discussion about a work-related issue. The Claimant subsequently lodged a grievance which was dismissed at the first and second stage of the grievance process. In the outcome letter, the Claimant was reminded she could appeal to a third and final stage.

The Claimant alleged that there had been failures throughout the process, as to impartiality of those investigating and the evidence which was relied on. The Claimant resigned and claimed constructive dismissal on the basis that there had been a breach of the implied term of mutual trust and confidence.

The Employment Appeal Tribunal found that the fact that the Claimant had not followed the grievance process through to the end was not relevant when determining if the implied term of mutual trust and confidence had been breached. It is the conduct of the employer not the employee which is relevant and her claim for constructive dismissal was therefore upheld.

How could it impact your business?

This is a useful reminder that grievance processes which have multiple stages should not be relied upon to ‘fix’ shortcomings in earlier stages of investigation. You should ensure that each and every stage of a grievance investigation is carried out to a high standard to minimise the risk of successful claims of constructive dismissal, even where the process has not been carried out to its fullest extent. This is because only the employers conduct is assessed by a Tribunal when assessing whether there is constructive dismissal.

Additionally, it confirms that the Tribunal should consider whether conduct is likely to have affected trust and confidence and not whether it actually did, widening the likelihood of a successful claim significantly.

What steps should you take?

Ensure that your processes regarding grievance (and other investigation) processes are well documented and followed strictly. This will ensure that you can evidence that a fair process has been followed and you can demonstrate monitoring of such a process.

You should be aware how failure to follow the ACAS Code of Practice of disciplinary and grievance procedures could impact the compensation which would be payable to a successful claimant, and draft policies with this in mind.

2-year cap on unlawful deduction of wages is unlawful (Afshar & Others v Addison Lee)

The case of Afshar & Others v Addison Lee provides a potentially impactful judgment in respect of unlawful deduction of wage claims. Previously, the position was that a Claimant could only claim unlawful deductions for the preceding two years. The Judge in this case found that this was unlawful as the decision to limit such claims had arisen by the inappropriate use of EU derived law that was ‘beyond the power’ of the courts. Therefore, claims for unlawful deductions could go beyond this limitation period.

How could it impact your business?

Employment tribunal judgements are not binding on other tribunals and it is highly likely that this decision will be subject to appeal. Especially as the two-year limitation period has been the position for 10 years and has not been successfully challenged before. It is possible though that, if this decision is upheld on appeal, it could enable those bringing holiday pay claims to seek compensation going back over a much longer period than the 2 year limit. Accordingly, the risks of failing to comply with the often complicated rules on the calculation pay could be increased and higher than previously anticipated.

What steps should you take?

This is simply an advisory point at this stage, and something that your business should be aware of. Until this decision is affirmed or appealed (as is likely to be the case) you should continue to monitor staff remuneration closely to ensure compliance with the Working Time Regulations and National Minimum Wage Act.

New guidance on neuro-inclusivity

ACAS have published new guidance on how employers can support neurodiverse people in joining and succeeding in the workforce which can be viewed here. Neurodiversity describes the difference in how people think, behave and process information and it includes:

• ADHD

• Autism

• Dyscalculia

• Dyslexia

• Dyspraxia

• Tourette Syndrome

Neurodivergent people may not always consider themselves as disabled, but they will be offered protection as having disability under the Equality Act if their neurodiversity has a significant and long-term impact on their ability to carry out normal day-to-day activities. The Equality Act provides employees with protection against discrimination and the right to reasonable adjustments at work.

How could it impact your business?

Whilst the ACAS guidance is just that, guidance, it is a very useful starting point in making your business more inclusive. Ignoring an inclusive approach to recruitment and failing to provide on-going support (particularly failures to make reasonable adjustments when required) could lead to claims of discrimination. Neurodiversity is a particular risk in this respect because many of those who experience difficulties can be reluctant to notify their employer of their diagnosis due to the stigma attached. Therefore, following this guidance provides some protection and best practice.

What steps should you take?

The guidance outlines ways to make your organisation neuro-inclusive including:

• reviewing your recruitment process:

  • outline skills which are essential and those which are desirable for the role

  • offer different ways to complete the application

  •  make reasonable adjustments

  •  reduce the use of jargon with clear language

•  training and supporting managers:

  • provide training on reasonable adjustments and discrimination

  • produce a policy on neurodiversity

  • review team workload regularly

  • monitor any changes to review their impact

• raising awareness of neurodiversity:

  • include awareness in mandatory training

  • consider accessibility needs

  • set up staff networks

• considering support for all employees, so neurodivergent employees can get support without having to share their neurodivergence

• having a neurodiversity policy

EU Omnibus Regulation

The EU is expected to streamline its package of EU sustainability laws, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CS3D) and the EU Taxonomy, into a single omnibus regulation (Omnibus ESG Regulation). However, the package which was due for publication on 26 February 2025 has been delayed until at least March 2025.

How could it impact your business?

The Omnibus ESG Regulation is a key strand in the Competitiveness Compass initiative and aims to simplify the current EU sustainability laws which apply to businesses both within and outside the EU by consolidating reporting requirements, guiding businesses and investors towards green initiatives and providing a framework for sustainable supply chain practices – all whilst supporting businesses in their efforts to meet sustainability targets, increase competitiveness and drive growth. However, there is uncertainty as to exactly what the package will do or whether the EU Parliament / Council will look to supplement the CSRD, CS3D or EU Taxonomy by proposing wider amendments to the Omnibus ESG Regulation.

Businesses may therefore face an unexpected increase in the cost of compliance whilst trying to develop sustainable business practices, alongside the increasing litigation risk in respect of supply chain transparency, green claims and general ESG matters whether from consumers, external stakeholders or investors. However, should the EU instead seek to reduce the compliance burden imposed by the current regulations subject to consolidation under the Omnibus Regulation, businesses could see less stringent compliance requirements; potentially undermining businesses’ efforts at combatting climate change through sustainable practices.

What steps should you take?

The Omnibus Regulation could be good news for small and medium companies (SMEs). It is heavily inspired by the findings of the Draghi report on the “Future of European Competitiveness”, and the wider goal of reducing the reporting burden on all companies by at least 25%, and at least 35% for SMEs. Whilst the exact contents of the Omnibus Regulation remain unknown at this stage, these indications suggest reporting obligations may become less burdensome, and organisations such as SME United are pushing hard for a standardised approach to SMEs to avoid larger organisations trying to push the compliance burden down the supply chain.

In the meantime, businesses should review their current obligations under the CSRD, CS3D and EU Taxonomy to determine their current obligations, and consider their views on these obligations in advance of any consultation.

Single Use Plastics

The Competition and Markets Authority (CMA), acting through the Office for the Internal Market (OIM) has concluded its study into the regulatory restrictions on single-use plastics (SUPs) in the UK Market on 12 February 2025, and published its final report here.

We commented on the OIM’s launch of the study in August last year here, and highlighted that one of the CMA’s priorities in its 2024/2025 annual plan was to ensure that the UK economy grows productively and sustainably, whilst tackling green issues and reducing barriers to trade.

The OIM’s study incorporates the feedback from its survey and investigation into the SUP sector eliciting several key takeaways. Based on these learnings, the OIM has put forward several recommendations for the Government to consider which could impact both businesses and consumers in the use of SUPs.

How could it impact your business?

As we anticipated, the OIM’s study found that businesses are overwhelmingly in favour of greater alignment across the four nations (England, Scotland, Wales and Northern Ireland) in relation to SUP regulation. The OIM found that standardised definitions and clear guidance would help businesses modify their manufacturing and distribution processes to help with the cost of compliance. Whilst for implementation, timely involvement and longer implementation/grace periods would help businesses understand any exemption criteria and reporting requirements, alongside managing existing stock.

The study cited the upcoming ban on single-use vapes as an example of best practice and collaboration between the four nations, enabling manufacturers and distributors to modify their stock to comply with upcoming changes.

Interestingly, respondents and stakeholders placed significant weight in aligning the UK’s approach to SUP regulation with the EU’s frameworks (such as the SUPs Directive and Packaging Waste Regulations), both in terms of scope and implementation.

The study also found that compliance with the existing regulations was inconsistent in the marketplace, with a number of stakeholders reporting that compliant businesses are often losing out on sales to cheaper, and oftentimes non-compliant, products. Although the OIM made no recommendations for dealing with compliance and enforcement of bad actors, given the pockets of non-compliance, it is likely that any updated regulation will include updated enforcement powers and procedures, particularly given the current legislative focus on sustainability.

What steps should you take?

Monitoring upcoming regulatory changes is crucial for businesses looking to manage their production and distribution channels, including managing stock which in the future could be subject to outright bans. Businesses should expect to see changes to SUP regulation in the mid-term, our team will provide any updates via our horizon scanning reports.

Minimum Energy Efficiency Standards

The Minimum Energy Efficiency Regulations (MEEs) remains very topical for businesses and Government. By way of recap, the UK Government wants to achieve net zero by 2050. As of 1st January 2025, that gives us 25 years to get there.

Energy Performance Certificates were first introduced in 2007. That enshrined ratings from “A” (Excellent) to “G” (Bad). In 2018, some 11 years after their introduction, minimum standard began to be introduced. Ther law made it clear that you could not sell or let a property (unless exempt) below the required standard of “E”.

Since April 2023, the legal requirement for commercial property is that it must achieve at least an EPC “E” rating in all circumstances to be sold or let. However, further changes to the MEES regulations are expected over the coming decade as follows:

• In 2025, the minimum standard is expected to rise to an EPC band D

• In 2027, the minimum standard is expected to rise to an EPC band C

• In 2030, the minimum standard is expected to rise to an EPC band B

How could it impact your business?

In our view, given that it has taken the best part of 7 years to shift from an “E” rating to a “D” rating as the minimum standard, the jump of three further rungs in the next five years does seem ambitious. This view is shared by The Royal Institution of Chartered Surveyors (RICS) who have said that they are concerned by the pace of chance, commenting that “without action, there is a risk that up to 50% of commercial buildings could be stranded by 2035”.

However, businesses are advised to consider the worst case scenario as, if you do not take the appropriate steps, the local authority (quaintly via their Weight and Measures division) may impose a penalty on the property if it is sold or let without the correct EPC rating. This is based on the rateable value of the property and can result in a fine of between £10,000 and £150,000 per breach. Naturally this would need to be disclosed on any sale of the property and its very presence may deter prospective buyers, so any owner would be well advised to steer well clear of it.

Banks are also becoming increasingly alive to EPC requirements and often insist that property owners upgrade their portfolios to higher ratings than required by legislation in order to future proof the portfolio. This will ensure compliance with the green credentials that many banks aspire to, as well as protecting against any value deterioration on account of energy performance.

What steps should you take?

The starting point is to look at the Recommendation Report that is attached to your Energy Performance Certificate and take on the advice of a good energy consultant.

You then need to ask where the property is inefficient in its energy use? Doors and windows are a common culprit in energy leaching. Single to double glaze windows and better insulated doors can provide rapid results. Energy efficient cladding should make a distinct difference to an energy rating, however it will come at a cost.

The next task is to reduce your consumed “carbon generated” energy. Electronic controls on heating apparatus are often a savvy investment. Whilst air source heat pumps have been seen by many as a panacea in that they use lower carbon energy sources (electricity as opposed to gas), the sheer cost of upgrading all associated heating infrastructure and pipework has rendered them prohibitive on some retrofits. Another approach is simply to remove the heating or air conditioning apparatus. It is the case often in industrial sheds that heating apparatus is not required for the processes undertaken there and air conditioning is a luxury as opposed to an essential item in a good number of buildings. Reduction of energy hungry apparatus remains a legitimate way of improving an adverse rating.

Linked to the above, solar panels and wind turbines are attractive things to consider. The cost of solar panels has come down exponentially in the past decade and whilst feed in tariffs have not been available for many years, the payback is relatively short. Wind turbines saw a softening of Government approach in 2024, however they remain expensive and are unloved by much of the public due to the noise they generate and perceived visual impact.

Football Governance: Current Themes

There has recently been a number of key decisions in the football governance sphere, which are likely to significantly impact clubs in the Premier League and how they operate financially.

In February 2025, Premier League clubs voted to delay the implementation of Squad Cost Ratio (“SCR”) and Top-to-Bottom Anchoring (“TBA”) past the 2025-26 season. SCR would limit “on-pitch spend” to 85% of a club’s revenue and net profit/loss on player sales. TBA limits spending to a multiple of the lowest combined prize money and TV rights forecast to be earned by a team in the Premier League.

Clubs were largely in agreement that these rules are preferable to the current Profit and Sustainability Rules (“PSR”), a regime which has recently led to Nottingham Forest and Everton receiving points deductions as a result of their breaches.

Amongst other reasons, including the undetermined impact of a new independent regulator as set out in the Football Governance Bill, the new costs regime has been delayed due to the uncertainty which has arisen from Manchester City Football Club’s (“Manchester City”) legal action against the Premier League regarding the Associated Party Transaction (“APT”) rules. These are rules which dictate the permitted value of transactions between clubs and their associated parties. On 13 February 2025, an independent arbitration panel made a further decision in addition to their initial findings against the Premier League in September 2024. The initial decision found sections of the Premier League rules to be unlawful, and in breach of the Competition Act 1998. It seems likely that the Premier League will hold off on significant changes until the latest challenge by Manchester City has been resolved.

How could it impact your club?

PSR (Profit and Sustainability Rules) changing to SCR (Squad Cost Ratio) and TBA

Under the current PSR regime, clubs are unable to record a loss greater than £105 million across the combined financial accounts of the previous three seasons (Rule E53 Premier League Handbook). This figure is reduced by £22 million for each season in the last three seasons that a club was not competing in the Premier League.

If a club records a loss of £15 million to £105 million, this loss must be covered by secured funding from the club owners (E52 Premier League Handbook). In essence, this means that a club can only lose £15 million of its own funds every three years. The current regime is widely recognised as an overly restrictive, complicated and anti-competitive model, which applies a blanket set of rules to a range of clubs with differing circumstances. Premier League clubs have been trialling SCR and TBA in shadow of PSR this season, submitting the relevant financial accounts to the Premier League on a non-binding basis. Clubs, by a vast majority, prefer this new regime.

SCR limits “on-pitch spend” to 85% of a club’s revenue and net profit/loss on player sales. This figure drops to 70% for clubs which are involved in UEFA competitions, so that these clubs can comply with the rules on the continental level (UEFA’s Financial Sustainability Regulations).

TBA acts as an ‘anchor’ to all clubs in the league, who are ‘anchored’ to the team receiving the least. Spending under TBA is limited to a (currently undisclosed) multiple of the lowest combined prize money and TV rights forecast to be earned by a team. In essence, whichever team is forecast to receive the lowest payout will have this multiplied by a set multiplier, and that will be the cap. The Premier League has said that this particular measure is “intended not to have an impact unless significant revenue divergence of clubs occurs”. It is therefore likely that this will not be as strictly enforced as the SCR regime, or the PSR regime as it is currently.

The possible sanctions are broad, and these are not likely to change with the new regime, given they are similarly implemented for other non-related breaches of the rules. Under Rule W.51, a club can be ordered to pay an unlimited fine, receive a points deduction, or face expulsion from the Premier League. Whilst the implementation of a prima facie simpler and fairer set of rules regarding club spending is welcome and will hopefully ensure that clubs are clearer on the rules and can spend within their own means, there are questions as to whether the TBA system in particular is anti-competitive, restricting clubs to their spending in tandem with the rest of the Premier League. It will be a question of how strictly this is enforced, however, it is clear that clubs will need to continue ensuring their compliance with the rules in order to avoid any threat of potentially severe consequences.

APT (Associated Party Transactions)
APTs are transactions/commercial deals entered into by clubs with companies to which they have close ties. An example of this would be Newcastle United Football Club, which is owned by the Public Investment Fund of Saudi Arabia, and also has sponsorship deals with the Saudi Arabian companies Sela and Noon. Where there is an APT, these are assessed by the Premier League to determine whether they were made at a fair market value (“FMV”).

Last year, Manchester City brought action against the Premier League, seeking a declaration that these rules were unlawful, including a claim that the rules were in breach of the Competition Act 1998. An independent arbitration panel found in September 2024 that the rules, in addition to a breach of public law, restricted competition contrary to the Chapter I and Chapter II prohibitions as set out in the Competition Act 1998. The main reason given for the breach was due to the exclusion of shareholder loans from the APT Rules. The panel stated “…to permit owner funding via shareholder loans that are not at FMV, whilst subjecting other forms of funding to the FMV test, is a clear distortion of competition between clubs”. Essentially, to permit low interest shareholder loans that are not at a FMV, whilst restricting other forms of funding, creates an anti-competitive imbalance, and an inconsistency in the rules.

Recently, Manchester City sought a further declaration that the APT rules were therefore, as a whole, void and unenforceable. The panel determined on 13 February 2025 that the ways in which the APT rules were unlawful cannot be severed, and therefore the APT Rules as a whole are void and unenforceable.

This action was brought in relation to the APT rules which were in place at that time, consequently determining the rules governing APT deals between December 2021 and November 2024 void and unenforceable. Whilst this is a decision made under arbitration, and so not technically binding case law precedent, it has widely been viewed as a decision which opens the door for affected clubs to bring action against the Premier Leage for breaches of the Competition Act 1998, and to seek damages for losses of opportunity sustained as a result of the APT rules.

Manchester City has recently brought further action against the Premier League regarding the new set of APT Rules, which came into force in November 2024. Manchester City argue that these rules have simply applied a retrospective exemption for such shareholder loans, which the club state “would introduce into the rules…one of the very things that was found to be illegal in the recent arbitration”. This decision is awaited and, until this point has been determined, it is likely that the financial rules of the Premier League will remain in some state of uncertainty.

What steps should you take?

Whilst the landscape remains uncertain for the time being, it remains clear that the sanctions available to the Premier League for breaches of its rules are significant. Clubs should therefore ensure that they are continuing to apply the SCR and TBA principles in shadow of the current PSR regime until these are implemented formally, so as to understand their operation and avoid any unintended breaches. Until such time as they are formalised, clubs should continue to follow the current PSR regime.

In relation to the APT Rules, clubs should note the further action being brought against Manchester City is in respect of the amended rules only, and so only governs deals from November 2024 onwards. APT’s between December 2021 and November 2024 have been found to be governed by unlawful, void and unenforceable rules which were in breach of the Competition Act 1998. If a club believes they have suffered consequential loss and damage in this period as a direct impact of the APT rules stifling their ability to enter into such transactions, our Competition Law team would be happy to discuss potential further action which could be taken.