“This is a case about the unlawful monopolization of premier stock car racing by the France Family in order to enrich themselves at the expense of the premier stock car racing teams that fans come out to see and that sponsors and broadcasters value.”
Thus begins a bombshell joint lawsuit filed on Tuesday in the Western District of North Carolina against NASCAR by the two teams that compete in the Cup Series that did not sign the charter extension agreement last month.
“The France family and NASCAR are monopolistic bullies and bullies will continue to impose their will to hurt others until their targets stand up and refuse to be victims. That moment has now arrived.”
23XI Racing and Front Row Motorsports are claiming that the conditions to compete in NASCAR limit revenue increasing opportunities because of the monopolistic way the Sanctioning Body operates itself — owning a majority of tracks, the rights to every component of the Cup Series race car, while seeking further control of the intellectual property rights of competing organizations.
The two teams also argue that the NASCAR brand is built primarily off the prominence of the teams and its drivers and are seeking a more equitable financial model that recognizes their contribution to the success of the league.
“NASCAR races are the number one motorsports events in the United States, with no other motorsport series coming close in broadcast ratings, live events, gate attendance right fees or corporate sponsorship revenue. This dominant position has not been created the superior product or skill of NASCAR’s owner — it is the product of the anticompetitive and exclusionary practices that NASCAR has employed to protect its premier racing series known as ‘the Cup Series’ from having to compete with any other premier stock car car racing series.
“The France Family has used NASCAR to acquire and maintain a monopsony position over premier over stock car racing teams through, among other among other anticompetitive actions, acquisition of other racing circuits and racetracks, anticompetitive agreements that restrict the availability of race tracks that are suitable for premier stock car racing, monopoly rules regarding the exclusive use of specialized ‘Next Gen’ cars, and non-compete restrictions that prevents premier stock car racing teams competing in the Cup Series from also participating in races outside of NASCAR’s circuit.”
This is the culmination of a two years process in which the sanctioning body and teams negotiated on a new revenue sharing and sporting governance model over what would go into the document that governs the sport:
- Teams had received around a minimum of $5 million in overall revenue from the league over the previous agreement for the lowest-ranked charter and will now receive around $8.5 million (Sports Business Journal) after seeking closer to $10 million
- It takes roughly $18 million per season per car to race at the Cup level
- Race teams have said they are all losing money and that they at least wanted a system that provided them break-even revenue that made them less reliant on sponsorship
- Teams wanted the charter system to be made permanent as opposed to running the course of each television contract but NASCAR would not budge on this
- Charter permanency could make the system akin to a franchise model used in stick-in-ball sports and NASCAR rejected that conceptually
- The above concept comes down to governance as teams wanted a greater say in rules changes
- NASCAR wants to be able to field teams, at least for now, using charters pocketed for release when and if a fourth manufacturer enters the sport
- There were differences over intellectual property rights, where teams would shoot media content (in-house versus the new productions facility)
- How new revenue, like sports betting, would be split in addition to legacy revenue like broadcast rights
- NASCAR put in an anti-disparagement clause which limited critical commentary about the sanctioning body that was met with skepticism
- The core issue at play is that teams believe they are not financially rewarded for the value its cars and drivers bring to the NASCAR brand at large.
NASCAR on September 6 presented a take it or leave final offer to teams with 13 signing, many of them suggesting privately that they felt forced into doing so.
The exact language was ‘forced at gunpoint,’ ‘under duress’ and ‘coerced.’
That agreement featured a modest increase in broadcast rights revenue but also had a provision that did not allow teams to file antitrust lawsuits against NASCAR. The teams claims that teams are only currently receiving 13 percent of NASCAR’s revenue and that drivers are only getting three percent. The comparison is made to the NBA, in which players get 49 percent of revenue.
23XI, which is also owned by Michael Jordan and veteran driver Denny Hamlin, alongside restaurant franchisee Bob Jenkins of Front Row Racing refused to sign that final offer.
They hired Jeffrey Kessler, the leading antitrust attorney who has represented players in all four major professional North American sports and most notably secured name, image and likeness wins for college athletes and a historic equal pay settlement for the U.S. National Women’s Soccer Team.
Kessler was first retained by the collective Race Team Alliance prior to the Daytona 500.
“This is reminiscent for me of many sports that have gone through a transformative model,” Kessler said. “(It’s) sort of a moment when the legal style basically confronts them and says, either you’re going to voluntarily change or you’re going to be changed and you can either get on the bus or get run over by the bus. No one wanted this litigation but NASCAR didn’t really give these teams any choice — you either submit to the bully or you fight. They’re going to fight.
“We think at the end of the day, NASCAR’s going to have to change because that’s what the legal system is going to require.”
Kessler also says that change is going to have to be significant, and not marginal, thus their clients not agreeing to an extension of a slightly modified charter agreement.
“If NASCAR is willing to change, it’s got to be a significant change to make a fair system for the teams,” he said. “If they’re not willing to do that kind of a deal, then they’ll take this case all the way to a jury and a judge, and that’s why I say they’ll be forced to change. It’s the same type of thing I went through with the NCAA, who had a choice to make. They could keep fighting in court and keep losing and have the new system thrust upon them or in that case, they finally sat down and said, we’re ready to transform the sport and we’ll be a part of it.
“That’s the type of choice that NASCAR is going to face.”
How the NASCAR charter system works
The teams are seeking details from NASCAR and France “related to their exclusionary practices and intent to insulate themselves from any competition.” They are also seeking a preliminary injunction that would allow the two teams to compete in 2025 under the charter agreement signed by the other teams while the litigation proceeds.
23XI Racing and Front Row are seeking what it deems as treble damages for anti-competitive terms since the inaugural charter agreement was signed in 2016.
Charter negotiations timeline
What the charter system is
Why it’s a doomsday scenario if a deal is not reached
Teams hired top antitrust lawyer against NASCAR
Jeff Gordon on why the business model needs to change
Michael Jordan says NASCAR will die without charter permanence
Denny Hamlin says teams just want break even revenue
NASCAR’s June offer to teams ‘was worst yet’
Denny Hamlin on why charters need to be permanent
Smaller teams unified with larger teams
NASCAR, teams making progress on charter deal but hurdles remain
Steve Phelps speaks to Kevin Harvick in wide ranging interview
How drivers feel about the state of the negotiations
Hamlin says negotiations will continue until NASCAR is reasonable
23XI, Front Row refuse to sign NASCAR’s final offer
Denny Hamlin defers to 23XI statement
NASCAR makes bold move to end standoff but two teams refuse
Brad Keselowski said time was right for a deal
Why Justin Marks signed the deal