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A letter from the chairman of the House Judiciary Committee in the United States has been sent to the heads of both F1 and Liberty Media seeking a briefing on Andretti’s rejection.
Sent by Jim Jordan, it seeks a briefing and full disclosure of documents and communications relating to the process of admitting a new team, and F1’s decision against Andretti.
“The Committee on the Judiciary is responsible for examining the sufficiency of federal competition laws to protect against monopolies and other unfair restraints on trade,” Jordan writes, in a letter first published by NBC News.
“Sports leagues, like Formula One, operate in a notable area of antitrust law in which some degree of collusion is necessary for the creation of the product.
“However, when a sports league deviates from its rules and practices in a manner that reduces competition and depresses consumer interest in the product, the collusion may amount to anticompetitive conduct.
“Accordingly, we write to request information about Formula One’s decision to block the partnership of Andretti Global and General Motors (Andretti Cadillac).”
Andretti Global was one of four applicants when the FIA opened an expressions of interest process for new teams.
While the three others failed to satisfy the governing body that they had the technical capabilities to compete in F1, Andretti did.
Its application was then referred to Formula 1 Group, the sport’s commercial rights holder, as mandated under the current commercial Concorde Agreement.
Having analysed Andretti’s entry, it was announced in January that its effort had been unsuccessful for a variety of reasons.
Among them were concerns about the operation’s ability to add value to the championship.
“The most significant way in which a new entrant would bring value is by being competitive, in particular by competing for podiums and race wins,” F1 announced in its statement denying Andretti’s entry.
It was a point that came under fire at the time, and one the House Judiciary letter also noted.
“The excuses put forward for denying Andretti Cadillac’s entry appear to be pretextual, arbitrary, and unrelated to Andretti Cadillac’s suitability to compete in Formula One,” Jordan’s letter stated.
“For example, Formula One alleged that a new team could only add value to Formula One by ‘competing for podiums and race wins.’
“However, the FIA had already analyzed—and approved of—the technical capabilities of Andretti Cadilac [sic] to compete among current teams, and most current teams in Formula One do not meet Formula One’s standard of regularly competing for ‘podiums and race wins.’”
Another cited reason for the rejection of Andretti was its intention to rely on a mandatory supply of power units from an existing manufacturer before General Motors entered in 2028.
“The need for any new team to take a compulsory power unit supply, potentially over a period of several seasons, would be damaging to the prestige and standing of the Championship,” F1 noted in January.
The House Judiciary letter addressed that point, too.
“Formula One also faulted Andretti Cadillac for attempting to use an existing engine manufacturer because it could ‘be damaging to the prestige and standing of’ Formula One.
“At the same time, however, Formula One stated that if Andretti Cadillac used a new engine manufactured by General Motors in the team’s first year, a new engine would create a challenge for the new team.
“Formula One cannot have it both ways.”
The House Judiciary interest comes as it looks to protect American consumers and companies from antitrust and monopolistic practices and follows a similar letter from US Congress to Liberty Media chairman and CEO Greg Maffei.
It follows similar questions to those raised by US Congress last week.
While Liberty Media is a US-registered and operated organisation, Formula 1 Group is based out of the United Kingdom. It is, therefore, unclear what jurisdiction the House Judiciary or Congress has over the championship.
Liberty Media is no stranger to accusations of antitrust practices with the US Justice Department preparing to sue Live Nation, an entity owned by Liberty, over Ticketmaster’s dominance of the ticketing market.
Ticketmaster has indirectly come under fire from Australian F1 fans following criticisms of the way sales for the Australian Grand Prix were handled.
Beyond that, a planned acquisition of MotoGP is set to go through antitrust review in a number of markets, Australia included, before regulators approve the deal.
In 2006, that saw F1’s former owner, CVC Capital, forced to divest its interest in MotoGP parent company Dorna.
Under the current model, MotoGP would sit within Formula 1 Group though would operate independently of F1 – a point stressed by Maffei to investors.
It has been suggested that deal could be a precursor to Liberty Media selling Formula 1, though that has been denied by sources within the commercial rights holder.
Liberty Media acquired the sport for $8 billion and has driven its value to, conservatively, $20 billion. It has now reached the point of diminishing returns in terms of adding further value.
The House Judiciary letter to Maffei and F1 president and CEO Stefano Domenicali cites claims from FIA president Mohammed Ben Sulayem that Andretti’s rejection was “all about money.”
“The Concorde Agreement is set to expire at the end of 2025, and reports indicate that a new agreement will include a much higher entry price tag or a total ban on new entry,” the letter states.
“In addition, as one team owner explained in his opposition to Andretti Cadillac’s entry, many of the uncompetitive teams are ‘not financially stable.’
“Weak teams want to be protected from competition to the detriment of consumers and an additional team would compete for prize money and sponsorships.”
That is a questionable claim as the sport’s teams are currently in the healthiest state they’ve ever been.
Where once it was common for at least one team to be fighting simply for survival, the value of each is now approaching $1 billion – with the top teams worth multiples of that.
Williams was sold for just $200 million in 2020. Forbes valued the operation at $725 million in July last year.
Changes to prize money payments have also levelled the playing field, arguably making the sport more competitive while the introduction of a cost cap has been transformative in terms of the financial health of teams.
However, Williams team boss James Vowles argued that the current model was still not sustainable for the smaller teams with owner Dorilton Capital still tipping money into the business. However, it posted a £46 million increase in revenue last year.
Vowles’ argument was that the introduction of a new team jeopardised the existing operations and posed an unacceptable risk to the health of the broader competition.
That’s a claim based on the payment of prize money and the need to increase the split from 10 teams to 11, and the loss each would experience as a result.
An analysis completed by Speedcafe last October, however, revealed that would be comparatively insignificant, even before any new income was injected into the sport.
It’s been claimed that Andretti’s arrival would bring with it new spending on trackside sponsorship and corporate hospitality from its partners, notably General Motors.
Teams receive prize money payments, a point enshrined in the commercial Concorde Agreement, based on F1’s earnings – which are predominantly derived from television deals, race promotion contracts, trackside signage, and corporate hospitality.
One observer suggested Andretti could add in the region of $100 million annually, a figure that would more than offset any negative financial impact caused by Andretti’s admission.
Denying Andretti’s entry onto the grid purely based on the financial health of rivals would potentially be considered antitrust behaviour. Allowing the teams to have a voice in the decision could also be considered antitrust behaviour.
It is why F1’s rejection of the bid instead centered on the ability of the operation to be competitive in a statement one source admitted to Speedcafe was written more as a legal document than a media statement.
Jordan’s letter gives Maffei and Domenicali until May 21 to respond.
In Full: Jim Jordan, Chairman of House Judiciary Committee, to F1 and Liberty Media
Dear Mr. Maffei and Mr. Domenicali:
The Committee on the Judiciary is responsible for examining the sufficiency of federal competition laws to protect against monopolies and other unfair restraints on trade. Sports leagues, like Formula One, operate in a notable area of antitrust law in which some degree of collusion is necessary for the creation of the product. However, when a sports league deviates from its rules and practices in a manner that reduces competition and depresses consumer interest in the product, the collusion may amount to anticompetitive conduct. Accordingly, we write to request information about Formula One’s decision to block the partnership of Andretti Global and General Motors (Andretti Cadillac).
On October 2, 2023, the Fédération Internationale de l’Automobile (FIA), the governing body for Formula One, approved Andretti Cadillac’s application to enter Formula One. The commercial agreement governing Formula One and its participant teams, known as the Concorde Agreement, allows for the entry of two additional teams if each new entrant is approved by the FIA and pays a $200 million fee. Of the four teams that applied to join Formula One, Andretti Cadillac was the only team approved by the FIA after a “comprehensive” and “stringent” process. FIA analyzed Andretti Cadillac’s “sporting and technical ability,” the team’s ability “to raise and maintain sufficient funding” to participate at a competitive level, and the team’s experience and human resources. Both Andretti Global and General Motors invested significant resources for FIA approval under the belief that the entry process would be clear and fair.
On January 31, 2024, however, Formula One abruptly rejected Andretti Cadillac’s entry into Formula One. The excuses put forward for denying Andretti Cadillac’s entry appear to be pretextual, arbitrary, and unrelated to Andretti Cadillac’s suitability to compete in Formula One. For example, Formula One alleged that a new team could only add value to Formula One by “competing for podiums and race wins.” However, the FIA had already analyzed—and approved of—the technical capabilities of Andretti Cadilac to compete among current teams, and most current teams in Formula One do not meet Formula One’s standard of regularly competing for “podiums and race wins.”
Formula One also faulted Andretti Cadillac for attempting to use an existing engine manufacturer because it could “be damaging to the prestige and standing of” Formula One. At the same time, however, Formula One stated that if Andretti Cadillac used a new engine manufactured by General Motors in the team’s first year, a new engine would create a challenge for the new team. Formula One cannot have it both ways.
The truth, as FIA President Muhamed Ben Sulayem explained, is that the rejection of Andretti Cadillac is “all about money.” The Concorde Agreement is set to expire at the end of 2025, and reports indicate that a new agreement will include a much higher entry price tag or a total ban on new entry. In addition, as one team owner explained in his opposition to Andretti Cadillac’s entry, many of the uncompetitive teams are “not financially stable.” Weak teams want to be protected from competition to the detriment of consumers and an additional team would compete for prize money and sponsorships.
If Formula One must hinder competition and harm consumers to protect failing competitors, then the entire Formula One model may be broken and the entity cannot hide behind the necessity of a sports league to pursue anticompetitive conduct. Delaying Andretti Cadillac’s entry into Formula One for even one year will harm American consumers to benefit failing Formula One teams. Limiting the number of teams in Formula One will increase the price of sponsoring or buying into an existing Formula One team. As the Committee examines this matter and considers potential legislation around the structure and competition of sports leagues, we write to request a staff-level briefing on the decision to deny Andretti Cadillac’s application to join Formula One. In addition, we ask that you please provide the following information:
1. All documents and communications referring or relating to the process for evaluating the entry of new teams into Formula One;
2. All documents and communications referring or relating to entry of Andretti Global into Formula One;
3. All documents and communications referring or relating to the January 31, 2024, decision to exclude Andretti Global from Formula One;
4. All documents and communications between or among Formula One Group or Liberty Media and the ten current Formula One teams referring or relating to the entry of a new team or teams into Formula One; and
5. All documents and communications referring or relating to the entrance fee or dilution fee in the current Concorde Agreement and possible changes to the entrance fee or dilution fee in a future Concorde Agreement.
Please schedule the briefing as soon as possible but no later than 5:00 p.m. on May 21, 2024.
