Key Legal Victory in the Legal Battle Between NASCAR and Racing Teams
A federal judge issued a crucial decision on Tuesday, granting a significant victory to two racing teams, one of which is owned by Michael Jordan. This ruling intensifies the pressure on NASCAR in the context of the antitrust lawsuit filed by 23XI Racing and Front Row Motorsports. Last week, Steve Phelps, NASCAR commissioner, stated that the series is “doing everything possible” to resolve the federal antitrust lawsuit. These comments represent the broadest statements to date from the defendants. United States District Judge Kenneth Bell ruled in favor of 23XI, owned by Jordan and three-time Daytona 500 winner Denny Hamlin, and Front Row, owned by Bob Jenkins. The decision was based on a discussion about the definition of the market for “premier stock car racing.” Bell determined that NASCAR controls the market, invalidating NASCAR’s argument that teams can compete in other series. The teams argued that the relevant market for top-tier stock car racing teams is where “the NASCAR Cup Series is currently the only buyer.” This position was supported by the expert opinion of Dr. Daniel Rascher, who concluded that “top-tier stock car racing” is a distinct form of motorsport, and that other competitions such as Formula 1 and IndyCar, as well as all lower levels of stock car racing, are not equivalent substitutes for NASCAR. NASCAR, in a countersuit, alleged that the teams illegally conspired by joining together to negotiate new franchise agreements. However, Bell determined that NASCAR “deliberately, clearly, and unequivocally” stated that the relevant market is “the market for the entry of cars in NASCAR Cup Series races in the United States and any other location where a Cup Series race is held”.The lawsuit was filed a year ago by 23XI Racing and Front Row Racing, who were the only two organizations out of a total of 15 that did not sign extensions to the new franchise agreements. The new franchise agreements were presented to the teams at the start of the 2024 playoffs, with a deadline for signing. This followed more than two years of tense negotiations over the franchises, which are fundamental to NASCAR’s business model, as they guarantee income and access to weekly races. 23XI and Front Row would likely go bankrupt without them and are competing this season without a franchise, which entails a significant reduction in prize money. Other teams have asked for an agreement to move forward, but mediation sessions and private negotiations have not worked. The trial is scheduled for December 1st.“The same transaction, the sale and purchase of top-tier stock car racing services, cannot be a different relevant market depending solely on which party is complaining,” Bell wrote. “Simply put, NASCAR made a strategic decision in filing its counterclaim and must now face the consequences.”
Judge Kenneth Bell
“This means the trial can now focus on whether NASCAR has maintained that power through anticompetitive acts and has used that power to harm the teams. We are prepared to present our case to the jury and are focused on obtaining a verdict that benefits all teams, partners, drivers, and fans.” NASCAR, in its own statement, highlighted the commitment it has demonstrated in building NASCAR as the premier motorsports series in the United States since its founding in 1948. Phelps did the same last week, reading a statement of more than six minutes; he defended the France family, based in Florida, which founded and controls NASCAR and most of the tracks that the series uses for events. “NASCAR hopes to prove that it became the premier motorsport in the United States through hard work, risk-taking, and many significant investments over the past 77 years,” NASCAR said in a statement. “Antitrust laws encourage this, and NASCAR has done nothing anticompetitive in building the sport from the ground up since 1948.” “While we respect the Court’s decision, we believe it is legally flawed and will address it at trial and in the Fourth Circuit if necessary. NASCAR believes in the franchise system and will continue to defend it from efforts by 23XI and Front Row to assert that the franchise system itself is anticompetitive.” Most of the organizations that did sign the new franchise agreements last year filed statements with the court in support of the franchise system and calling for a settlement in the case. All teams want the franchises to be permanent, something NASCAR did not concede during the current agreement negotiations.“We are very pleased with the Court’s decision today, which ruled in our favor. Not only does it deny NASCAR’s request for summary judgment, but it also grants our request for partial summary judgment, determining that NASCAR has monopoly power in a properly defined market,” stated Jeffrey Kessler, the lawyer representing 23XI and Front Row.
Jeffrey Kessler, lawyer for 23XI and Front Row
If an agreement is not reached before the trial and NASCAR loses, the entire franchise system risks being dismantled or revised. The teams are frustrated by that threat, and it is understood that NASCAR has since agreed to make the franchises permanent and the obstacle in the agreement talks is the amount of money that 23XI and Front Row are demanding in damages and legal fees.
Teams are concerned that the entire NASCAR framework could be destroyed by a loss and are upset that it is due to the monetary demands made by 23XI and Front Row. Last week, Bell issued another victory for 23XI and Front Row when he dismissed NASCAR’s counterclaim against Curtis Polk, Jordan’s longtime business manager and one of the owners of 23XI.
