F1 News: Andretti has them by the balls, they just don’t know it yet (2nd Update)
In denying Andretti Global entry into F1, did Liberty Media breach a 2001 agreement with the European Union courts that clearly required a complete separation of state between the F1 Commercial Rights holder (Bernie Ecclestone, but currently Liberty Media), and the governing body (the FIA)?
–by Mark Cipolloni–
In 2002 there was a lawsuit brought by Phoenix Finance against the FOM and the FIA because they were denied entry into F1 by buying the defunct Prost F1 team. FOM’s then-legal head, Sacha Woodward Hill, stated, “…FIA alone determines and controls whether Phoenix (or any other entrant) can compete.
“FOM and FOA have nothing to do with deciding this: if FIA announces that an entry has been accepted and that a certain team can compete, that is the end of the matter as far as FOM and FOA are concerned.”
Those comments demonstrate that there was no right for the commercial rights holder to have a say on entrants in any way in 2002.
As Matt Coch of Speedcafe points out in this article, “Those comments demonstrate that there was no right for the commercial rights holder to have a say on entrants in any way in 2002.
“That can be taken to mean there was no such clause in either the Concorde Agreement (which ran from 1998 to the end of 2007) or the 10-year commercial deal that was negotiated between the FIA and FOM in 2001.
“While the contents of the Concorde Agreement that followed (from 2007) are not public knowledge, it is understood that there was no clause or compulsion to have signed a commercial agreement with Ecclestone.”
Coch goes on to write that in his book, Unfiltered, Guenther Steiner recounts in some detail the process of applying for a license for the team and fronting an FIA panel.
He also notes that the final approval came following a presentation to the sport’s governing body, with Charlie Whiting confirming the team’s admission.
There is no reference to a subsequent commercial negotiation or obligation.
What is not clear is whether the Commercial Rights holder now has veto power over the FIA’s decision to grant a team entry into F1 because the latest Concorde Agreement is secret and not published.
Whatever the reality is with regard to timing, there is no doubt that the commercial rights holder now holds veto power over new entrants – Andretti Global’s plight demonstrates that perfectly.
And that begs the question: given the European Commission and that clearly separation between commercial and regulatory roles once existed, what changed, why, and does it hold water in the face of that 2001 judgement that clearly separated the Commercial Rights holder’s decision-making and the FIA’s? Did the EU courts approve such a change, if one indeed exists?
A commercial rights holder exercising regulatory power could be considered a breach of competition laws and appears to directly contradict the 2001 European Commission outcome.
The fact that the existing Concorde Agreement allows for up to 12 F1 teams (two more than the current number of 10 teams) means that the Commercial Rights holder agreed to allow the FIA to add up to two additional teams.
It is against this backdrop that Liberty Media finds itself under investigation by the Department of Justice in the United States over antitrust concerns.
If Liberty Media is found to have violated USA antitrust laws, and if they also violated the 2001 agreement with the EU courts, they could stand to be fined billions of dollars.
Related Article: Liberty Media gets hit with a 3rd monopoly charge
Speaking on the Pit Talk Podcast, Matt Coch revealed that Andretti are spending ‘eye-watering’ amounts of money that is rivalling that of the current team on the F1 grid.
“They’re spending huge amounts of money, like huge. You have no idea how much money that joint is spending,” he said.
“I’ve had a little bit of intel on that one, it’s eye-watering. It’s on par with what the current teams are spending, so it’s a serious business.”
January 31, 2024
–by Mark Cipolloni–
One of our readers raised the issue regarding this article, pointing out the fact that the UK and FOM are based in London and hence would no longer fall under EU laws.
This is incorrect.
That would be true if they only did business in the UK – but they do business in the EU (run races there) and therefore would fall under the EU jurisdiction.
The risk of being barred from doing business in the EU would be a showstopper for F1; hence they would back down quickly.
As an example, if you build a passenger plane in the UK, but want to sell it in the USA, you must meet all USA legal requirements. If a lawsuit arises, the UK firm selling the planes would find themselves in a USA court of law.
Ditto for Andretti vs. Liberty/FOM
February 27, 2023
by Mark Cipolloni
In reality, Michael Andretti has them by the balls over being barred from entering a team in F1, they just don’t know it yet.
Related Article: FOM rejects Andretti’s F1 Application
All this talk of the existing team owners asking Liberty Media to change the Concorde Agreement early to raise the Anti-Dilution Fee paid by any new team wanting to enter F1 from $200 million to $600 million likely has Andretti’s lawyers champing at the bit.
In fact, they are probably hoping and waiting for the day they make the change.
The existing Concorde Agreement (where the $200 million is stipulated) runs through 2025 and any attempt to change it before that will backfire in their face.
That’s when Andretti and his legal team could grab them wear it hurts and squeeze until they beg for mercy.
You see, the European Union has very strict laws against anti-competition.
The F1 team principals have played the media like a fiddle by suggesting that the anti-dilution fee is a franchise fee, demanding that new entrants pay them (as if they were franchisees) compensation for perceived loss of business.
However, the franchisor is Liberty media, and the existing 10 teams are not franchisees and not a dime goes to Liberty media – it all goes to the teams.
If I open a new McDonald’s franchise near an existing McDonald’s, the existing McDonald’s Franchise holder does not get paid a dime in compensation from the new McDonald’s franchise holder – it all goes to the parent company and stays there.
In the case of F1, the Anti-dilution fee goes to Liberty and is then immediately paid out to the existing 10 teams, who do NOT own a single percent of F1.
It is the actions Liberty Media has taken that has made F1 so successful today. Before that, the teams were bleeding so much red ink it was hard to justify their existence. The only one getting rich was Bernie Ecclestone.
Now the teams are suddenly crowing about the global successes of F1 as though they had driven this and are thus entitled to compensation from new teams.
Even more irony – when they were all offered preferential shares back in early 2017 – before Liberty listed F1 on NASDAQ – they all turned down an offer of options from Liberty. Hence, the teams own no part of F1, only Liberty media who owns 100% of the commercial rights, and the FIA who own the championship, on loan to Liberty for 100 years. The FIA also acts as the regulation body.
Thus, their arguments that they now deserve $600M instead of $200M are defacto restraint of trade moves attempting to stifle competition – strengthening existing teams and weakening any newcomer(s).
If they are dumb enough to get Liberty Media to agree to raise the entry fee from $200 million to $600 million, Andretti’s lawyers will immediately be on the phone with Brussels and the EU Courts complaining of restraint of trade, and they will ask for relief and will likely get it.
The Andretti Team could ask not only for a reduction of the entry fee back to $200 million, but also legal fees and perhaps additional compensation for ‘alienation of affections,’ that basically says you don’t want me to compete because you don’t like me, and based on all the comments made against Andretti by the team owners, he might win that too.
In addition the EU might slap a fine on them for their actions, perhaps as high as $1 billion as a deterrent from ever trying it again.
The only problem with Andretti taking this action, action he’s likely to prevail with, would be he would further alienate himself with the existing team owners and FOM.
But this is F1, the ultimate Piranha Club, where the knives are always out!
Andretti might be in his office sharpening his now.
Drive to Survive film crews – take note! Season 6 (2023 racing season) might be better than anyone imagined!
Toto Wolff again shouting No, Mikey No!
