Commission closes its investigation into F1

After a three-year anti-trust inquiry into Formula 1, the European Commission has closed its investigation and declared itself satisfied with the way the sport is run. Formula One Administration, SLEC and the FIA have all come under close scrutiny...

After a three-year anti-trust inquiry into Formula 1, the European Commission has closed its investigation and declared itself satisfied with the way the sport is run. Formula One Administration, SLEC and the FIA have all come under close scrutiny after the European Commission received complaints of the restrictive business practices of motorsport's governing body and the companies set up to take care of the financial side of F1.

This case has been ongoing for several years, and saw the two organisations come under severe criticism from the former European Commission Competition Commissioner, Karel van Miert. In 1998 he told the Wall Street Journal: "I've never had a case with so many infringements" and commented that this was the single worst case of antitrust violation that he had ever seen. The first formal complaint was made to the European Commission in 1997.

The sport has made several concessions in light of the investigation, although cynics believe these are the merest cosmetic touches. The FIA has had to relinquish all commercial interest in the sport and become solely a governing body. The FIA also proved that it would not impede or prevent the creation of new series that could rival Formula 1, which may explain its co-operation with Premier1 Grand Prix. Thirdly, the FIA has strengthened internal and external appeal processes.

Numerous cases of antitrust have been brought up, including the FIA preventing circuits that hold a Grand Prix from hosting other open-wheel racing and charging broadcasters more for the rights to Formula 1 if they decided to show other forms of racing.

European Commission press release

Here is the European Commission full press release:

The competition department of the European Commission has informed the four-wheel motor sports regulator, the Fédération Internationale d'Automobile (FIA), and the Formula One companies that it has closed the various anti-trust investigations into certain regulations and commercial arrangements involving that sport. This action was made possible after the parties agreed to make changes which limit the FIA to a regulatory role, so as to prevent any conflict of interests, and remove certain commercial restrictions put on circuit owners and TV broadcasters. Developments in the sector will be kept under scrutiny to ensure that the changes work in practice.

The Commission's investigation of the FIA regulations and commercial agreements relating to the FIA Formula One Championship came about following voluntary notifications in 1994 and 1997 requesting clearance from European competition rules. The Commission objected to certain of the rules in 1999 on the grounds that FIA had abused its power by putting unnecessary restrictions on promoters, circuit owners, vehicle manufacturers and drivers as well as to certain provisions in the commercial agreements with television broadcasters.

The Commission fully recognises the need for organisations such as the FIA to regulate the organisation of its sport, its sporting rules and its competitions. However, the spectacular transformation of sports such as football and motor racing into 'big business' has inevitably led to third party challenges of certain rules and commercial agreements under the European Union competition rules.

Following discussions with Competition Commissioner Mario Monti, the FIA agreed to modify its rules to bring them into line with EU law. After consulting interested third parties and the Member States, the Commission is now ready to close the file. The modifications introduced by FIA will ensure that : * The role of FIA will be limited to that of a sports regulator, with no commercial conflicts of interest; * The FIA rules are not used to prevent or impede new competitions unless justified on grounds related to the safe, fair or orderly conduct of motor sport; * Internal and external appeals procedures against FIA decisions are strengthened.

To prevent conflicts of interest, FIA has sold all its rights in the FIA Formula One World Championship and will allow the creation of potential inter- and intra-brand competition between Formula One and similar races and series.

The FIA will, therefore, have no influence over the commercial exploitation of the Formula One Championship.

In addition, FIA and SLEC/FOA, the companies in charge of the commercial exploitation of Formula One, agreed to various changes in the commercial agreements for Formula One designed to lower or remove barriers to entry for the creation and operation of other motor sport series, in particular those that might compete with Formula One. This was achieved, for example, by removing restrictions in circuit contracts about the hosting of other motor sports events.

Aside from the Commission's concern to ensure that FIA's role is limited to that of sports regulator, the Commission has also taken into account the effect that valuable TV sports rights can have on national broadcasting markets. To this end, FOA agreed to modify the current agreements and offered certain commitments for their future conduct. In particular, broadcasters in the various countries will be invited to tender for the TV rights on the expiry of the current (and any future) contracts.

The parties have also agreed to reduce the length of new free to air broadcasting contracts to a maximum of three years (except for contracts where specific investments justify a length of up to five years).

Background

The Commission issued a Statement of Objections in the above case in 1999.

The parties proposed a number of changes to the notified arrangements, which led to the Commission publishing a Notice pursuant to Article 19(3) of Regulation 17 on 13 June 2001. The Notice indicated that the Commission took a positive view of the changes and invited third parties to comment on the changes before the Commission reached a final position. No new information was brought to the Commission's attention in this public consultation process.

The agreement between the FIA and FOA for the sale of any rights that the FIA may have in Formula One has been concluded for a period of 100 years. On the expiry of this period, the rights will revert to the FIA. The effective separation of the FIA's commercial and regulatory roles will during this time be ensured by the fact that FIA's interests will be represented by an independent third party. The role of this third party will be solely to safeguard this reversionary interest, and the third party will not be involved in the commercial exploitation of Formula One.

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