Key Legal Victory in the Battle Between NASCAR and Racing Teams
A federal judge issued a significant victory for two racing teams, one of which is owned by Michael Jordan, putting pressure on NASCAR to resolve the antitrust lawsuit filed by 23XI Racing and Front Row Motorsports. NASCAR commissioner Steve Phelps stated last week that the series is “doing everything possible” to resolve the federal antitrust lawsuit, in what were the most extensive comments 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, in a dispute over the definition of the “premier stock-car racing” market. Bell determined that NASCAR controls the market and that NASCAR’s argument that teams can compete in other series is moot.The teams argued that the relevant market for top-tier stock-car racing teams is that “the NASCAR Cup Series is currently the only buyer.” This argument was supported by the expert opinion of Dr. Daniel Rascher, who concluded that “top-tier stock-car racing” is a distinct form of auto racing, and other types of motorsports such as Formula 1 and IndyCar, as well as all lower levels of stock-car racing, are not an equivalent substitute for NASCAR. NASCAR, in a countersuit, claimed that the teams illegally conspired to join in negotiations over new franchise agreements, but Bell determined that NASCAR alleged “deliberately, clearly and unequivocally” that the relevant market is “the market for the entry of cars in NASCAR Cup Series races in the United States and anywhere else a Cup Series race is held”.NASCAR controls the market and the argument that teams can race in other series is debatable.
Judge Kenneth Bell
The lawsuit was filed a year ago by 23XI Racing and Front Row Racing, when they were the only two organizations out 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 them to be signed. This followed more than two years of tense negotiations over the franchises, which are the core of NASCAR’s business model, as they guarantee revenue 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 organizations 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.
Judge Kenneth Bell
NASCAR, in its own statement, highlighted the commitment it has demonstrated in building NASCAR as the leading motorsport series in the United States since its founding in 1948. Phelps did the same last week while reading a statement that lasted 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 leading motorsport in the United States through hard work, risk-taking, and many significant investments over the past 77 years. Antitrust laws encourage this, and NASCAR has done nothing anticompetitive in building the sport from the ground up since 1948. 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 asking for a settlement in the case.We are very pleased with the court’s decision today, which rules in our favor. This means that the trial can now focus on whether NASCAR has maintained that power through anticompetitive acts and has used that power to harm the teams.
Jeffrey Kessler, attorney for 23XI and Front Row
All teams want the franchises to be permanent, something NASCAR did not concede during the negotiations for the current agreement.
In the event that an agreement is not reached before the trial and NASCAR loses, the entire franchise system risks being dismantled or revised. Teams are frustrated by that threat, and it is understood that NASCAR has since agreed to make the franchises permanent and the sticking point in the settlement 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 torn apart by a loss and are upset because it would be due to the monetary demands being made by 23XI and Front Row. Bell issued another win last week 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.
