F1 Teams make Formal Complaint to Brussels

Posted on September 30, 2015.

The following article by Christian Oliver and James Allen was posted on the Financial Times website:

twt5s3ozTwo of Formula One’s smaller teams have made a formal competition complaint to the European Commission, saying the sport is rigged in favour of its bigger teams.

Force India and Sauber are unhappy with how F1’s prize money is distributed and how decisions are made on new regulations, technology and car design.

In a statement about the complaint, which was lodged on Monday, Force India said: “Sahara Force India is one of two teams to have registered a complaint with the European Union questioning the governance of Formula One and showing that the system of dividing revenues and determining how Formula One’s rules are set is both unfair and unlawful.”

It added that it would not comment further because of “ongoing legal discussions”.

Momentum towards a complaint has been building for several months, with smaller teams saying that they have been pushed into a crisis. Caterham and Marussia, two UK-based F1 teams, went into administration last year.

Margrethe Vestager, EU competition commissioner, must now decide whether the case merits a landmark antitrust showdown with Bernie Ecclestone, F1’s chief executive. Weighing the merits of a complaint can take several months and F1 will also receive a right to reply.

The complaint focuses on two areas, but both suggest that F1 is tilted in favour of the teams in the so-called strategy group, in effect meaning that smaller teams are unable to mount a credible challenge on the Grand Prix circuit.

The strategy group is made up of the sport’s six largest outfits, including Ferrari, Mercedes-Benz and Red Bull Racing, as well as Formula One Management and the Fédération Internationale de l’Automobile, the regulator.

Force India holds the single floating seat on the strategy group but does not enjoy the annual bonus payments made to other members, which vary between $10m to $100m per team. The Force India team looks set to finish in the top five of this year’s championship, so should keep its seat on the group for 2016.

The first element of the complaint concerns financing. The smaller teams argue that media revenues are disproportionately allocated to their bigger rivals, who all receive a large share of funds regardless of their performance on the track.

The second element concerns the rule-making structure of the sport, whereby the strategy group makes key decisions on technology, regulation and car design in the interests of the bigger teams.

Ms Vestager has gained a reputation as a tough commissioner and has already opened major antitrust cases against Google, the US technology giant, and Gazprom, Russia’s gas export monopoly.

Still, people following the sport case say that it is not yet clear whether she will see a broad public interest. The smaller teams will have to prove to her that the damage done by a lack of competitiveness in motorsport affects more people than their direct employees.

They will need to prove that what is in effect a bar on the number of teams that can really win the championship is having repercussions for a wider economic ecosystem of media deals, ticket sales and merchandise.

“F1 is being sold as fair competition, but we’d say it is a rigged competition,” said one person involved.

A spokesman for the commission acknowledged receipt of the complaint and said it would now be assessed

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