Ecclestone in talks with EU over F1 anti-competitive allegations

Share This Post

I can’t place my finger on the ultimate reason that Formula One Management did individual deals with the teams a few years ago but it was around the time that the Formula One Teams Association (FOTA) were rattling sabers about starting their own series due to the mandatory budget cap the FIA imposed as well as the timing (this was 2009) of the financial crunch. The teams were trying to work with FOM and the FIA in order to improve the sport as even then they felt it was sliding.

In order to break that power base, Ferrari and Red Bull were lured away from FOTA with individual contracts and Ferrari were then being led by Luca di Montezemolo who was an ally of FOM boss Bernie Ecclestone. If memory serves correctly, Mercedes did not have a seat at the adults table at this point either and they lobbied very hard to get the kind of deal that Ferrari, Red Bull and McLaren were given. A deal was eventually struck and FOTA disappeared.

A few years later and the balance of power has swung to a democracy where the teams have much more power within F1’s direction and the prize money is weighted toward the top teams. Force India and Sauber lodged a complaint with the EU over anti-competitive allegations due to this prize money structure. It was revealed today that the EU has been in talk with FOM’s Ecclestone on the matter.

“They’re starting to get more and more interested in the anti-competitive way that we’ve got,” said Ecclestone.

“Conversations have taken place and they will do what is the right thing to do.”

I said at the time the complaint was filed that Ecclestone might actually welcome the investigation because he knew the power base had shifted and he has contracts with each team that cannot be discarded or it would lead to serious legal action. His comment above is clear indication that he is frustrated with the situation and would welcome the EU’s help in tearing up the existing contract. Ecclestone is publicly saying that they’ve got an anti-competitive situation right now. The reason he says that is relatively plain as I said last year.

It’s clear that the FIA and FOM are not happy with the current contracts and even FIA president Jean Todt was quoted this week saying:

“The governance is not good, but the governance has been there for decades.

“We wait until the renewal of the Concorde Agreement by 2020 and decide to change the governance.

“We are in 2016, and it cannot be until 2020. We cannot get out of this governance.

“Unless the teams, the commercial rights holder and the FIA decide to change, then we can do it tomorrow.”

The FIA knows it isn’t optimum and so does FOM. Both Todt and Ecclestone seem frustrated with the current situation and governance of F1. As I mentioned, I can’t be 100% certain as to why Ecclestone did this deal but I know he must have felt compelled to. It’s interesting because reading Max Mosley’s biography, there was little chance of the teams ever realistically starting their own series. The FIA has the legal right to govern any racing series and FOM has the circuits locked down with contracts. So why did he do these individual deals and not a new Concorde Agreement? The short answer is that he must have had to but it would only be speculation on my part as to why.

The deal Ecclestone did with Ferrari isn’t a deal he thought he would eventually have with Sergio Marchionne who would make the most of a lucrative or sweet deal that Ferrari signed. Where Di Montezemolo may not have played hardball with the benefits that were given the Ferrari, Sergio will. Luca would have been more measured and respectful of the long relationship he’s had with Ecclestone (to a point) and Sergio has no history there. At least that’s my hunch. Sergio, along with Mercedes, has leaned pretty heavily on the sport even denying Red Bull engines and demanding $20-30M for engine contracts bankrupting smaller teams.

It’s their right as organizations signatory to F1’s current governance structure and if you were to measure the success of deals done, Ecclestone would most likely say this one was one of his worst. That, in my opinion, is why he is welcoming the EU’s involvement. A judgment by the EU could legally negate the contracts—which are set until 2020—and would dissolve any legal breach by FOM or the FIA. I said it back in September of 2015 and I still believe it now given Ecclestone’s statement above. Ecclestone is looking for a way out of this contractual obligation with the teams that has given them tremendous power in a democracy format.

The odd thing is that Todt is very keen to have this democracy continue or at least that’s what he says and why shouldn’t he? He would either want total control of the sport or a democracy but not total control lying in the hand of FOM. You can read his full comment at AUTOSPORT about having complete control of the sport. Todt also commented on the EU investigation saying: “Yeah, if the EU got really excited about it they could look at it and say, ‘You’ve got to tear that up’.”

It seems pretty clear that the FIA and FOM are not opposed to the EU canceling their current contracts, in fact, they would most likely welcome the assist.

Hat Tip: AUTOSPORT

15 COMMENTS

0 0 votes
Article Rating
Subscribe
Notify of
guest

This site uses Akismet to reduce spam. Learn how your comment data is processed.

15 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Giraffes

The EU could allow the existing contracts to continue and Bernie step up to give the smaller teams more money. Not a conclusion Bernie would want, its not the teams fault that there are unfair contracts its Bernies and the EU is more likely to require Bernie to restore the balance.

Also if the teams contracts are torn up, then the teams do not have to compete next year. Conversation:
Bernie: Sorry guys you have to take half of what you get today and compete next year
Merc/ Ferrarri: no we don’t!

Negative Camber

Very good points my friend and you’re right, if the contracts aren’t torn up but the EU deems the prize money distribution illegal, then that’s an issue although it would be difficult to un-pin the prize money percentage as they are part of the contracts he has with each team so the contract would have to be repealed and re-written. That would be a legal nightmare. Without a contract, the teams would not be obligated to participate and as you say, that would be a very tough spot as well. Recall 2009 when FOTA did not sign up at the… Read more »

Lovejoint

“it would be difficult to un-pin the prize money percentage as they are part of the contracts he has with each team so the contract would have to be repealed and re-written.”
Not necessary cuz there’s still 45% of the pie, which now goes into CVC’s pocket, to share amongst “underprivileged” teams;)

Negative Camber

Good point, if they feel the team contracts can stay intact but then start parsing the CVC/FOM portion of the distribution but as it is, the teams get 63% of the prize money, it’s how that 63% is divided between which teams that is the issue. It may be difficult to argue that a minority partner in the distribution total should recognize less revenue and bolster the already strong 63% more for smaller teams. Seems like that would be a tough position to take.

The Captain

Can we please stop calling this a “Democracy”. This structure isn’t even a “democracy” by the early Athenian standard. Just because more than one party is involved in a decision does not make a system a democracy. If anything it’s probably closest to a confederation, with aspects of an oligarchy or Particracy.

Negative Camber

That’s what the FIA and FOM call it so I’m using their language. Jean Todt is adamant that it is a democracy and that he only works in democracies and wants to keep it that way. The link I provided to AS is a bit odd in which he suggests they, the FIA, should have control but then also says he likes the democracy.

The Captain

Yea, I know, and I didn’t mean be barking at you Todd. Just being nit picky (at Todt apparently) Like I said this constant bad new in the sport is making me a little grumpy. Which is a shame since the racing has actually been pretty good so far. Sure Merc is out front, but Ferrari might have a shot. The midfield is great! Haas is a boon for American F1 fans, along with Grosjean looking like the happiest kid at the birthday party. There’s a great inter-team battle at Torro Rosso. Alonso smacking down Johnny Herbert on live Tv.… Read more »

Boycottthebull

Bernie is playing the EU like he is some kind of victim here. The illegal strategy group and the corrupt way that monies are distributed are all Bernies own doing. Now because he wants to get out of those contracts and and get back more control so he is going to con the EU to do it for him.

Negative Camber

He may be looking at the EU as a leverage device in negotiations. Just a hunch. I think he admitted that he was the idiot that brought in the F1 Strategy group. He would probably say it wasn’t his best deal but until it all plays out, you never know. :)

Shocks&Awe

I think Bernie really misses Max. He’s just outnumbered now, and that makes the moves he can make much more limited. Especially with Di Montezemolo gone too. He’s got no really allies anymore.

RJL2601

Ted Kravitz said he thought they signed the top teams up on those contracts around the time F1 was going to float on the Singapore Stock Exchange. Does that sound familiar @negativecamber

charlie white

I heard Ted Kravitz say the same thing. My memory may be faulty but with the start of the FOTA and potential IPO in Singapore, Bernie feared the manufacturers and some teams were close to starting a breakaway series and they were fed up with both FIA and FOM. So Bernie did old task of divide and conquer: offering the top teams a bigger piece of the profit pie coming from the IPO and some self-governance if they stayed with him and FIA. Remember how quickly everything fell apart when Bernie got Ferrari out of FOTA and the rest came… Read more »

Paul KieferJr

Y’know, in addition to the above (which I do agree with), if this succeeds, Bernie might also have the right to tell any team “Get out” (and that would include Haas).

Tim C.

Bernie is a smart guy. He wouldn’t have gotten where he was otherwise. But, it’s time for Bernie and CVC to ride off into the sunset.

228929292AABBB

Interesting insights. Your knowledge of the history between the parties involved makes sense of what would otherwise seem quite random. Informative and thought provoking piece.

PatreonPayPal
15
0
Would love your thoughts, please comment.x
()
x