Michael Jordan's 23XI and a 2nd team sue NASCAR over revenue sharing model

 

[October 03, 2024]  By JENNA FRYER

CHARLOTTE, N.C. (AP) — Two NASCAR teams — one of them owned by Michael Jordan — filed a federal antitrust lawsuit against the stock car series and chairman Jim France on Wednesday, claiming the new charter system limits competition by unfairly binding teams to the series, its tracks and its suppliers.

23XI Racing and Front Row Motorsports filed suit in the Western District of North Carolina in Charlotte after two years of contentious negotiations between the privately owned National Association for Stock Car Auto Racing and the 15 charter-holding organizations in the series' top Cup Series.

“The France family and NASCAR are monopolistic bullies,” the teams said in the lawsuit, a copy of which was obtained by The Associated Press. “And bullies will continue to impose their will to hurt others until their targets stand up and refuse to be victims. That moment has now arrived.”

NASCAR in early September presented its final offer on what is essentially a revenue sharing model; 13 organizations signed, with most saying they did so under duress or felt threatened into doing so.

But 23XI Racing, the team co-owned by Jordan and veteran driver Denny Hamlin, and the smaller Front Row team refused to sign. They hired Jeffrey Kessler, a top antitrust attorney who has represented the players in all four major professional North American sports, helped push the NCAA toward an era of paid college athletes and won a landmark equal pay settlement for members of the U.S. national women’s soccer team.

The lawsuit seeks details from NASCAR and France “related to their exclusionary practices and intent to insulate themselves from any competition.” Kessler said he would ask for a preliminary injunction that will enable the two teams to compete in 2025 under the new charter agreement while the litigation proceeds.

The teams said they will seek treble damages for anti-competitive terms that have ruled the sport since the initial 2016 charter agreement.

“Everyone knows that I have always been a fierce competitor, and that will to win is what drives me and the entire 23XI team each and every week out on the track,” said Jordan, the retired NBA superstar. “I love the sport of racing and the passion of our fans, but the way NASCAR is run today is unfair to teams, drivers, sponsors and fans. Today’s action shows I’m willing to fight for a competitive market where everyone wins.”

A NASCAR spokesman said the series does not comment on pending litigation. NASCAR is based in Daytona Beach, Florida.

What is a charter?

The charter system introduced in 2016 included revenue sharing and other elements of the business for the top motorsports series in the United States while guaranteeing 36 entries in every lucrative Cup Series race. Of the 19 team owners who were originally granted charters in 2016, the lawsuit says, only eight remain in the sport.

One of the departing teams was Furniture Row Motorsports, which sold its charter for $6 million at the end of the 2018 season — a year removed from winning the Cup Series championship — proof, the plaintiffs say, that the charters left the teams without a path to profitability.

The original charters lasted from 2016 through 2020 and were automatically renewed to continue through Dec. 31, 2024. With expiration looming, teams argued the revenue sharing is unfair and demanded a larger share of the pot.

Front Row owner Bob Jenkins has maintained he’s never turned a profit since forming his team in 2005. He won the Daytona 500 in 2021 with driver Michael McDowell, and failed to break even in that banner season.

With four sons and a desire to leave something for his family to run, Jenkins said he wants a fair agreement.

“I have been part of this racing community for 20 years and couldn’t be more proud of the Front Row Motorsports team and our success. But the time has come for change,” Jenkins said. “We need a more competitive and fair system where teams, drivers, and sponsors can be rewarded for our collective investment by building long-term enterprise value, just like every other successful professional sports league.”

Denny Hamlin (11) leads Chase Briscoe (14) and Christopher Bell (20) during a NASCAR Cup Series auto race, Saturday, Sept. 21, 2024, in Bristol, Tenn. (AP Photo/Wade Payne)

What do the teams want?

During negotiations, the teams asked for more revenue, a voice in governance and rule-making, and a cut from deals NASCAR earns off the names, images and likenesses of the participants.

The teams also wanted the charters to be permanent; France has refused.

According to the suit, NASCAR presented a take-it-or-leave-it offer on Friday, Sept. 6, 48 hours before the playoffs began. It says NASCAR threatened teams to sign the more than 100-page agreement or risk losing not only their charters but the charter system itself unless “a substantial number of teams” agreed.

“The teams knew that fielding a NASCAR car had become so expensive that it would be economically devastating for most of them to compete without even the modest revenue sharing and stability provided by the charter system and the complete loss of their charter values if the charter system was discontinued,” the lawsuit claims.

Rick Hendrick, the winningest owner in NASCAR history, has said he signed only because he was worn down by the negotiations. 23XI Racing and Front Row held out but their motivation remained unclear until Wednesday’s court filing.

What does the lawsuit claim?

The suit argues NASCAR violated the Sherman Antitrust Act by preventing any stock car racing team from competing on the circuit “without accepting the anticompetitive terms” it imposes.

“Faced with a take-it-or-leave-it offer, and no competing opportunity for premier stock car racing in the United States, most of the teams concluded that they had to sign,” the lawsuit states. “One team described its signing as ‘coerced,’ and another said it was ‘under duress.’

“A third team said, NASCAR ‘put a gun to our heads’ and we ‘had to sign.’ A fourth described NASCAR’s tactics as that of a 'communist regime.' None of these teams would permit their identities to be publicly revealed for fear of retribution from NASCAR.”

How did it get here?

NASCAR was founded in 1948 by the late Bill France Sr., and has since been run first by his son, Bill Jr., then his grandson, Brian France, and now France Sr.’s second son, Jim. Ben Kennedy, the son of Bill Jr.’s daughter, Lesa, is the heir apparent to the family business.

The lawsuit maintains that NASCAR until 2016 operated under year-to-year contracts that provided no long-term viability to any team. There was no guaranteed entry into any Cup Series event or prize money, and teams depended on individual sponsorships they had to find themselves.

That model made sustainability next to impossible for any owner who tried to operate exclusively as a racing team without additional outside businesses. Chasing sponsorship became a full-time job and teams often found themselves competing with NASCAR outright for financial deals.

The teams felt they were operating in a “constant state of financial vulnerability” that put some of the most successful organizations out of business, the lawsuit states. It quotes NASCAR Hall of Famer Jimmie Johnson, who has mostly retired as a driver and is the co-owner of a fledgling Cup Series team.

“In the words of NASCAR Hall of Famer Jimmie Johnson,” the lawsuit says, “the best thing to be is NASCAR, the second best a driver and the last thing a team owner.”

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