Deals with Teams in the Same Economic Group: A Challenge for FIFA

The SAF Law (Law 14.193/2021) is transforming the football ownership model in Brazil. Before it, the football club's owner was, in almost all cases, a club, which is, legally, a non-profit civil association. At the club level, there is not one owner, but rather several owners, who acquire membership titles and, with them, the right to vote. Each title confers the right to one vote. Millionaire, wealthy, middle-class, and lower-class members are, in theory, equal in weight, importance, and influence.

In practice, however, individuals, regardless of their financial status, or groups of individuals, who understand the political workings of the association and rally votes around a leader or a slate, stand out. Furthermore, they use the electoral process, direct or indirect, as the case may be, to dominate the institution and, ultimately, determine the allocation of its assets (and, therefore, its available and future resources).

The system that guides associations involves handing over everything to one or a few people, with no financial compensation and, worse, no effective checks to prevent abuses and other issues. Systemic flaws proved far more significant than their potential virtues, contributing to the accumulation of debt and the decline of the football industry.

After decades of monopoly on associations as a form of organizing the activity and after unsuccessful attempts contained in the Zico and Pelé Laws (Laws No. 8,672/1993 and 9,615/1998, respectively), a process of redefining the ownership model began in Brazil, enabling access to capital through the football corporation (SAF).

This is, in fact, one of the characteristics of the corporation, a corporate type of which the SAF (as a subtype) is a part: subject to a regulatory framework that enables it to access resources to finance its activities. Since the enactment of the SAF Law, 117 corporations have been established in the country, with a wide range of characteristics and purposes, reaching investors with diverse profiles.

A business model consists of the integration of a SAF, which by definition is a company incorporated in Brazil and subject to Brazilian law, with a group of other teams (or partnerships), of local or international origin.

The most emblematic case is that of Bahia, which joined the powerful City Group and, since then, despite little media attention, has, year after year, established itself as a significant national force.

Botafogo is another example. Eagle, the parent company of SAF Botafogo, controlled or participated in other partnerships, based in other countries, which, locally, managed teams with varying degrees of tradition.

Regardless of the Brazilian definition of a group of companies, especially since the situation involves multiple jurisdictions, capital structures, and business purposes, the two cases are very different. Grupo City and Eagle interacted, if at all, only from the perspective of managing teams spread across different countries.

Even with these differences, intra-group management can occur in the interests of the controlling shareholder and, consequently, to the detriment of one of the group members. This situation does not necessarily imply illegality. On the contrary: the Brazilian Corporations Law (Law 6,404/1976) allows, under the terms established therein, the formation of a group by convention and the submission of the interests of the controlled companies to the controlling company.

However, in the realm of football, especially in internationalized structures, not only do individual interests theoretically not align with those of the manager—that is, with the group's perspective—but also potential decisions can cause immediate and irreversible damage, such as potentially dashing title hopes. For example, with the transfer of a key player to another team in the group at a crucial moment in the season.

On the other hand, the prospect of a title itself may derive exclusively from the manager's performance and investments, lending him a certain legitimacy to arbitrate on the most appropriate decision, sportingly or economically. At both Bahia and Botafogo, the new competitive projections for the former, and the titles won for the latter, would be mere dreams (or daydreams) without the SAF Law and the corporate structures derived from it.

These scenarios reveal that there is no obvious or single solution to the problem. Each case is unique and inevitably involves unique characteristics. But there is undoubtedly already a challenge in Brazil and abroad that could become even greater.

The challenge must be analyzed from three distinct perspectives: contractual, legislative, or (self-)regulatory.

Within the contractual framework, the recipient of an investment can impose restrictions on the investor's actions, making the imposition conditional on the consummation of the deal. In other words, determining that, without the impositions, they will not proceed with negotiations. This position will be effective if (i) the club is able to waive the investment in the event of refusal, (ii) the investor has chosen that team to form its group, and (iii) there is no alternative to investing in another team.

However, if there were an interventionist state regulation that prevented or restricted certain deals, despite the abstract protection of the invested club and the elimination of the costs and stress of negotiation, all situations would never be covered and, worse, the result would imply the scare away of significant investments, such as those of the City Group.

The issue can also be evaluated from a regulatory perspective, in which case systemic, supra-state solutions would be directed toward, and, to the extent possible, guiding the conduct of regulated agents.

In this regard, it seems to me that only FIFA has the authority—and regulatory authority—to design a model with global reach and effectiveness.