Media-Revenue Allocation in Formula One – A Case for Competition Policy?

Abstract

Two midfield teams competing in the FIA Formula One World Championship (motor racing), have reportedly lodged a formal complaint to the European Commission. They raise two concerns about violations of competition law. First, the system of allocating media revenues (predominantly from the sale of broadcasting rights) between the participating teams is allegedly unlawful and unfair because of non-performance related extra payments to some teams and a heavily front-biased performance-related distribution scheme. Second, the system of rule-making in F1 is unlawful and unfair because some teams have more influence on rules and rule-changes than others. According to the complainants, the commercial rights holder (CRH) abuses its power to benefit certain teams over others and forms a cartel with the favored teams as well as the governing sports authority in order to set the rules in an anticompetitive way for the complaining teams. This comment argues that an investigation into Formula One’s revenue and governance structure is justified since there is ample indication of anticompetitive arrangements.

Keywords: Formula One motor racing, antitrust, competition policy, sports, economics, abuse of power, media economics, broadcasting rights

JEL Classification: K21, L12, L40, L83, Z20