Key Legal Victory in the Battle Between NASCAR and 23XI Racing
A federal judge issued a significant decision in favor of two racing teams, one of which is owned by Michael Jordan, increasing pressure on NASCAR to resolve the antitrust lawsuit filed by 23XI Racing and Front Row Motorsports. Last week, NASCAR commissioner Steve Phelps stated that the series is “doing everything possible” to reach a settlement in the federal antitrust lawsuit, in what were the broadest comments made so far by the defendants. U.S. District Judge Kenneth Bell ruled on Tuesday in favor of 23XI, owned by Jordan and Denny Hamlin, a three-time Daytona 500 winner, 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 lacks validity. 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 statement 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 that 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. In a counterclaim, NASCAR alleged that the teams illegally conspired by joining together to negotiate new franchise agreements, but 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 anywhere else a Cup Series race is held”.The lawsuit was filed a year ago by 23XI Racing and Front Row Racing, when they were the only two organizations out of the 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 came after 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 probably go bankrupt without them and are running this season without a franchise, which entails a significant reduction in prizes. 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 live with 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 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.“We are very pleased with the court’s decision today, which ruled in our favor. Not only does it reject NASCAR’s motion for summary judgment, but it also grants our motion for partial summary judgment, determining that NASCAR has monopoly power in a properly defined market,” said Jeffrey Kessler, the lawyer representing 23XI and Front Row.
Jeffrey Kessler
“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 claim that the franchise system itself is anticompetitive.”“NASCAR expects to demonstrate that it became the leading 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.
NASCAR
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. All teams want the franchises to be permanent, something NASCAR did not concede during negotiations for the current agreement.
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 problem 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 destroyed by a loss and are upset that this 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 long-time business manager and one of the owners of 23XI.
