In new research, Mariana Pargendler, Maria Luiza Mesquita, and Lucas Víspico study how antitrust authorities in the Global South have used family ties to define business enterprises and analyze mergers and acquisitions for possibly anticompetitive behavior.

Competition authorities have traditionally focused on equity ties in the form of stock ownership and control to define the boundaries of the firm for purposes of antitrust scrutiny. Our recent working paper shows how competition authorities in multiple jurisdictions in the Global South—Argentina, Brazil, Indonesia, and Turkey—have repeatedly relied on family ties to define an enterprise (or undertaking) in enforcement actions.

Family ownership is the dominant form of corporate ownership structure around the world and is especially prevalent in emerging markets. Family firms often operate differently from other types of firms. A recent study found that family firms are less likely to be subject to antitrust enforcement in Italy. Family ownership can be especially useful in compensating for institutional shortcomings in developing countries, such as weak contract enforcement and capital market failures. At the same time, family control may facilitate corporate corruption. A new Stigler Center Working Paper by Pablo Balán, Juan Dodyk, and Ignacio Puente suggests that family ties can be used to augment corporate power and circumvent regulations. The authors show that, faced with a new ban on corporate political contributions, individual members of Brazilian companies’ controlling families have substituted personal for corporate contributions.

Competition agencies in the Global South have recognized the economic significance of family ties and their potential to undermine the enforcement of antitrust law. They have relied on family relationships to legally connect legal entities that are controlled by different individuals within the same family in investigating mergers and anticompetitive agreements.

Assessing anticompetitive effects in merger review

A review of the Mataboi acquisition by JBJ, both of which operate in the meat industry at various and overlapping stages, provides an illustrative example. Brazil’s antitrust authority (CADE) initially sought to undo the JBJ acquisition of Mataboi in 2017, not because it would pose a threat to competition if JBJ were analyzed in isolation, but because of JBJ’s links to JBS, the world’s largest meat producer. While there were no significant equity ties between JBJ and JBS, there were relevant family ties connecting the two companies: the controlling shareholder of JBJ was a brother of the controlling shareholders of JBS, and their father was a shareholder and board member of JBS. This case also shows how antitrust authorities’ reliance on family ties to prevent mergers can be contested. CADE ultimately settled the case, subject to modest concessions, after a court issued a preliminary injunction suspending the authority’s decision to undo the deal.

Similarly, Turkey’s competition authority (Rekabet Kurumu) assessed family ties between different shareholders of bidders in the privatization of power companies. Three members of the Kazanci family controlled MMEKA, while the family’s holding company—whose majority shares were owned by the father of one of the relatives—controlled Aksa. The authority treated the bidders as a single undertaking and blocked certain purchases to prevent dominance in relevant markets. Rekabet Kurumu’s decision acknowledged the potential conflict between family ties and principles like freedom of enterprise and competition. However, it held that, while individuals in a family corporation can pursue independent activities, family links leading to a unity of interests justify applying competition law rules to restrict those freedoms.

Determining the trigger for merger notification

Family ties have also played a significant role in determining when companies must notify antitrust authorities about their mergers. A striking example of this can be observed in Argentina’s 2013 case involving the acquisition of Lácteos Conosur, a provider of dairy goods, by Alimentaria Conosur, a holding company. Argentina’s competition authority (CNDC) drew attention to the fact that a mother and her two sons collectively held 50% of the shares in the acquirer, while the husband and father controlled other relevant firms in related markets. The CNDC then relied on these family connections to consolidate the companies under the father’s control and calculate their combined turnover, resulting in a total volume of business that surpassed the threshold for mandatory merger review.

A 2018 decision by Turkey’s Rekabet Kurumu also used family ties to consolidate the financial turnover of different companies in determining the trigger for merger review. The transaction involved Mavi, a well-known clothing and denim company founded by Sait Akarlilar. The authority examined whether the sale of Blue International’s stake in Mavi to other Akarlilar family members—Sait’s wife and children—triggered the requirement for merger notification. It found that the “family links” and “common interests” among the Akarlilar family members meant that the holdings of Erak—a jeans manufacturer solely controlled by Sait Akarlilar—and those of his wife and children in Mavi should be considered as a “single economic unit” after the transaction. It thus combined the holdings of Erak and the Akarlilar family to calculate the total turnover of the undertaking.

Evaluating anticompetitive agreements: sword or shield?

When it comes to anticompetitive agreements, antitrust authorities have considered family ties for opposite purposes. In Brazil and Indonesia, family connections between shareholders of different companies have been used as evidence of bid rigging or cartel, therefore leading to convictions. On the other hand, Turkey has relied on family ties as a factor in a single enterprise defense against accusations of illegal restraints.

According to Brazil’s CADE, family ties are strong indicators of anticompetitive behavior because they enable the exchange of information and strategic coordination among competing firms. Our research shows that, in the last nine years, CADE has explicitly taken family connections into account in 12 cases of bid rigging and in one case of forming a cartel. Indonesia’s antitrust authority (KPPU) has also addressed bid rigging cases involving family ties. In a 2016 decision concerning road rehabilitation and maintenance procurement in Makassar City, the KPPU detected collusion among various companies and public officials, including by identifying family ties between two brothers who held stakes in different companies participating in the bidding process. The agency concluded that the parties had violated Indonesia’s competition law, resulting in fines and a two-year prohibition on participating in similar procurement processes with the Public Works Office of Makassar City.

By contrast, the Turkish competition authority has admitted consideration of family ties as a defense against accusations of illegal restraints. Under Turkish law, concerted practices are considered unlawful only when involving multiple agents, which implies that practices within the same undertaking are not subject to antitrust enforcement. In a 2012 case, the Rekabet Kurumu investigated four companies accused of colluding to secure a government contract for road construction. Upon examination, it discovered shared guarantee letters, the use of the same accountant, and a common address among these companies. Their shareholders were also relatives and shared the same surname. Based on these factors, the antitrust agency concluded that the four separate legal entities operated as one single economic unit and were therefore exempt from antitrust enforcement.

Family ties matter: implications and conclusion

Although the European Commission’s 2008 Consolidated Jurisdictional Notice explicitly mentions the potential relevance of “family links” for purposes of defining an undertaking, antitrust cases that hinge on family ties between different natural persons appear to be much more common in the Global South. This finding is consistent with the particularly strong prevalence of family ownership of enterprise in developing countries as an adaptation to a weak institutional environment. The relevance of family ties in antitrust enforcement in developing countries points to an unnoticed form of variation in comparative antitrust law across Global South-North lines and shows the adaptability of legal institutions in Global South jurisdictions to local circumstances. 

Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.