NASCAR, America’s hugely popular stock car racing organization, has a say in who may race and profit from race revenue. NASCAR was accused of antitrust violations in issuing race charters, but the parties have settled the lawsuits.
Although NASCAR (National Association for Stock Car Auto Racing) sounds like a national organization, it is privately owned by the France family. NASCAR chairman and CEO, Jim France, is the majority shareholder. The organization issues charters to race teams, which operate like a franchise. This charter allows a team to race in the NASCAR Cup Series and have a share in the profits.
Who Sued NASCAR and Why?
Race teams 23XI Racing (partially owned by NBA basketball legend Michael Jordan and Daytona 500 legend Denny Hamlin) and Front Row Motorsports (owned by Bob Jenkins), sued NASCAR in federal court for antitrust violations. The plaintiffs alleged that NASCAR had unfair leverage over the racing teams as they set the terms of the contracts, could revoke the charters, and controlled the money. The teams were either forced to accept the terms of an unfair contract or go out of business, the lawsuit alleged.
The plaintiffs, who negotiated for two years regarding the NASCAR charters, were presented with a “take or leave it” contract that they had to sign with a one-day deadline. While other race teams signed the contracts, the plaintiffs filed suit.
Did NASCAR Violate Antitrust Laws?
Antitrust laws prevent a company or organization from running a monopoly or using its size and power for unfair advantage over smaller companies.
The plaintiffs claimed that NASCAR controlled the race charter agreements, making them revocable at their discretion, leaving the plaintiffs with no bargaining power. The plaintiffs argued that the charters should be made permanent with a revenue-sharing model.
What Happened at Trial?
The trial lasted eight days before the settlement. The plaintiffs had an economist testify that “NASCAR owns the tracks, the teams and the cars,” signing exclusivity agreements with tracks to eliminate competition with other racing series. This leaves racing teams no other options to race.
He estimated that NASCAR’s unfair revenue sharing model created $364.7 million in damages owed to 23XI Racing and FRM.
Within days of the damaging testimony, NASCAR and the plaintiffs reached a settlement, allowing the plaintiffs permanent racing charters.
Why Did NASCAR Settle?
If the two sides ultimately settled, why did they go to trial in the first place? Going all the way to trial in litigation is costly and time-consuming. However, going to trial can impact settlement negotiations, particularly if the trial is going well for one side.
In this case, the jury did hear damaging testimony against the defendant, not only from expert witnesses but from other team owners, such as Richard Childress and Rick Hendrick, about how the system was unfair and cost teams money. Additionally, preliminary discovery revealed unfavorable text messages among NASCAR executives calling Childress a “redneck” and other degrading names.
NASCAR may have been prompted to resolve the antitrust lawsuit with the plaintiffs and not leave the decision to a jury. By settling a case, a defendant does not admit to the allegations, so it can’t be found as breaking the law. It also avoided any further testimony from experts and witnesses that may damage the company’s brand.
Both parties seemed pleased with the outcome but have not released all terms of the settlement. However, we do know that 23XI/FRM and other teams will get permanent charters and a share of media/IP revenue. The parties issued a joint statement that the “agreement allows all parties to move forward with a unified focus on advancing stock car racing and delivering exceptional competition for our fans.”
Related Resources:
- NASCAR Fan Settles Traumatic Brain Injury Lawsuit (FindLaw Personal Injury)
- State Antitrust Laws (FindLaw State Laws)
- Michael Jordan’s Teams Race to Stop NASCAR’s Business Model (FindLaw’s Legally Weird)
