Nascar lawsuit: Judge rules series controls stock car racing in big win for teams

• Judge has ruled that Nascar has used monopsony power in agreeing charters
• Court case will now decide whether series has unlawful control of stock car racing market

Nascar’s lawsuit with 23XI Racing and Front Row Motorsports (FRM) has taken another twist, as Judge Kenneth Bell has ruled that Nascar controls ‘premier stock car racing’, marking a major win for the two teams ahead of the court date on 1st December.

The crux of the argument from 23XI and FRM is that Nascar operates a monopoly on stock car racing, a claim Nascar has denied. Nascar has argued that other motorsport series, such as Formula One and IndyCar, offer viable alternatives for teams.

However, Bell ruled that this is not the case, and the upcoming trial will now focus on whether Nascar holds unlawful control over the stock car racing market.

A court filing read: ‘Nascar argues that the relevant market that it alleges for its counterclaim – in nearly the same words as plaintiff describes their relevant market – is somehow not the same market. A simple example should suffice to show why Nascar can’t play the same hand twice in different ways.

‘In pursuing its counterclaim, Nascar argued that the plaintiffs had market power in the relevant Cup Series market because it could not reasonably substitute IndyCar or Formula One racing teams or even the racing teams participating in its two lower level series.

‘However, in opposing plaintiffs’ relevant market, Nascar now contends that the same motorsports that could not supply racing teams to the Cup Series are suddenly readily available substitutes for the Cup Series teams like plaintiffs to sell their services.

‘Not only is it illogical, but there is no record evidence that racing teams in the various motorsports can only move from Nascar to another motorsport but not vice-versa. Again, Nascar wants to (but cannot) have it differently on each side of the same coin – heads we win, tails you lose.’

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The judge also ruled that Nascar had exercised monopsony power – a situation where a dominant or sole buyer can pay below-market prices to sellers – to maintain control over stock car racing.

Nascar argued that it could not be considered a monopsony because team revenues had increased under the latest charter extension. However, the judge found that the ‘take it or leave it’ offer, which compelled most teams to sign, undermined that argument.

The court filing read: ‘In the face of these considerable undisputed facts, Nascar argues that there is still a material factual dispute on the issue of its monopsony power because its payments to the teams have increased rather than decreased over time.

‘ … First, with full control over the limited duration charters necessary to be an economically viable Cup Series racing team, Nascar indisputably had the power to decrease demand by denying charters to any team that did not agree to its final charter terms.

‘The fact that it only had to use that power against the plaintiffs doesn’t mean that it lacks monopsony power. Also, the relevant inquiry is whether Nascar had the power to suppress team payments below competitive levels.

‘ … Evidence that Nascar ‘increased’ payments, without reference to whether those payments reached the level of a ‘competitive’ market falls short of that proof.’

Nascar responded to this ruling stating that it has ‘done nothing anticompetitive in building the sport from the ground up since 1948’. The sporting body also claimed the court’s decision is ‘legally flawed’ and that Nascar ‘will continue to defend [the charter system] from 23XI and FRM’s efforts to claim that the charter system itself is anticompetitive’.

Unsurprisingly, the teams welcomed the decision. 

The statement from 23XI and FRM read: ‘We are very pleased with the court’s decision today, ruling in our favour. Not only does it deny Nascar’s motion for summary judgment, but it also grants our partial summary judgment motion, finding that Nascar has monopoly power in a properly defined market.

‘This means that the trial can now be focused on whether Nascar has maintained that power through anticompetitive acts and used that power to harm teams. We’re prepared to present our case to the jury and are focused on obtaining a verdict that benefits all of the teams, partners, drivers, and the fans.’

BlackBook says…

This is a significant victory for 23XI and FRM, which vastly increases the likelihood of a settlement being reached before the case goes to court in December.

On the surface, Nascar appears to be at a disadvantage, but the case hinges on whether the championship has exercised unlawful control over the stock car racing market – something that is yet to be proven.

What will concern Nascar and the teams, however, is Judge Bell signing off his ruling with the suggestion that the entire charter system could be unlawful.

The ruling read: ‘There is also evidence in the record from which the jury and/or the court could conclude that the charter agreements themselves are anticompetitive restraints on trade with respect to Cup Series aspirants who don’t have charters.’

If a settlement is not reached and the charter system is legally dismantled, the fallout would be seismic. In short, the value of the charter agreements would evaporate and teams’ investments could be rendered worthless.

There are sure to be more twists to come, but these are increasingly nervous times for Nascar.