Cade wants data on the sale of Botafogo, Cruzeiro and Vasco and assesses a fine of up to R$60 million

CADE (Administrative Council for Economic Defense) asked Cruzeiro and Botafogo for information on the sale of the clubs and may fine them up to R$60 million for carrying out the transaction without previously notifying the antitrust agency.

Vasco was also sent a letter with a request for clarification, although the transaction involving the Rio de Janeiro team has not yet been finalized. The three clubs must submit the information by early next week.

According to the antitrust legislation, the so-called mergers, acquisitions, mergers, associative contracts and other operations must be submitted to the board’s prior scrutiny in which at least one of the groups involved has gross annual revenue or volume of business in the country equal to or greater than R$ 750 million.

In addition, the other party in the business must have registered sales or transactions equal to or greater than R$75 million.

Failure to comply with the prior notification requirement implies penalties such as fines, ranging from R$60,000 to R$60 million. An administrative proceeding to investigate violations of the economic order can also be initiated, and the operation runs the risk of being annulled.

Despite the law being applied to companies, there is a discussion whether football clubs would be required to comply with this rule.

Currently, the teams are mostly non-profit associations. A law passed last year by Congress and sanctioned by President Jair Bolsonaro (PL), however, now allows the conversion of a club into a Sociedade Anônima do Futebol (SAF) – also known as a company-club.

In the migration process, the SAFs have owners or investing partners. Cruzeiro and Botafogo have already adopted the model, which allowed the sale of control of the teams.

American businessman John Textor, a partner at Crystal Palace (ING), bought 90% of SAF do Botafogo, with the promise of making R$ 400 million in investments. Cruzeiro, on the other hand, sold the club’s SAF to the group led by former player Ronaldo.

In the case of Vasco, the club closed an agreement in the United States for the sale of 70% of its future SAF. The transformation is not yet complete. For R$700 million, the percentage must be negotiated with the American fund 777 Partners.

In the understanding of competition authorities, heard privately by the Sheet, a literal interpretation of the law could exclude clubs from the antitrust rules. However, CADE can make a more elastic analysis of competition law.

Preliminarily, it can be assessed that, upon becoming a SAF, a club becomes automatically notifiable by CADE. But, as this is a new topic, the issue still needs to be analyzed to establish an understanding in the body.

According to one of the authorities, it is necessary to take into account that the clubs explore an important economic activity for society, in which millionaire transactions are carried out. Although the SAF law has a provision that prevents the controlling shareholder of the company-club from having a stake in another company-club, says this authority, the risk to competition would not be completely removed.

The central question is: what if the control of a SAF is sold to a business group that already has shares in another team? In this case, CADE’s advisors assess, competitive barriers may be created in the sports market, reducing competition and bringing losses to the consumer.

There is also concern about cross-sponsorships between clubs.

From the three clubs, CADE requested copies of the contracts and detailed information on the transaction, such as who the buyers are and the corporate structure of SAF, before and after the transaction. The body also wants the list of direct and indirect shareholders and quotaholders.

Among other data, the list of companies in which SAF has a stake above 20% in Brazil, the gross revenue of all those involved in the country, in addition to all the product and service lines offered by the club in which they could be There were overlaps with the buyer group.

Refusal, omission or delay of the data requested by CADE can result in punishment with a daily fine of R$ 5 thousand, which can be increased up to 20 times.

Questioned by the report, Botafogo said that it was sought out by Cade and that it will provide the answers within the established deadline. Cruzeiro also said that it will respond to the request of the agency and answer questions.

Vasco said that he still has the deadline to respond and that the negotiation for the sale of SAF is still in progress.

What is the problem analyzed by Cade?

According to competition defense legislation, the so-called concentration acts (such as a purchase or merger) in which at least one of the groups involved has annual gross sales or business volume in the country equal to or greater than to R$ 750 million. The clubs did not previously notify the antitrust body of the negotiations to create the SAFs.

Should clubs have notified Cade?

Although the law applies to companies, there is a discussion about clubs being required to comply with this rule.

Are clubs companies?

The teams are mostly non-profit associations. A law passed last year by Congress and sanctioned by President Jair Bolsonaro (PL), however, now allows the conversion of a club into a Sociedad Anónima do Futebol (SAF).

Which of the teams under review are SAFs?

Cruzeiro and Botafogo were already converted into SAFs, which allowed the sale of control of the teams.

What consequences can this first analysis by Cade have?

Failure to comply with the prior notification requirement implies penalties such as fines, ranging from R$60,000 to R$60 million. An administrative proceeding to investigate violations of the economic order can also be initiated, and the operation is still at risk of being annulled.