Sports Law Blog
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Monday, January 22, 2007
A New Dawn in F1
Formula 1 (F1) seems to have at long last found its feet in America. Not only has Indianapolis regained its place as a legendary F1 venue but Scott Speed scored a first valuable point for the Scuderia Toro Rosso - incidentally, Scott's performance may not be enough to secure him a driving seat for 2007. Meanwhile, the European Commission (Commission) has finally put an end to its investigation into the Formula One and other four-wheel motor sports. And it may change the face of the sport as we know it. In the late 90's, the Commission's attention was drawn to the regulatory and anti-trust issues regarding the governance of F1, centered on the role of the FIA.
The days of F1 as the playground of Bernie Ecclestone and the FIA may not be over just yet, but the repercussions of this long investigation represent a new dawn. We have to go back to 1994 to understand the sort of stranglehold Mr. Ecclestone had on the sport. Back then, F1 was directly run by the FIA (the sport's regulating body), FOA (which held the commercial rights to F1) and ISC (which had acquired F1's broadcasting rights for subsequent resale). The link between all three entities was Bernie Ecclestone, whether as a director, owner or founder. Throughout the whole process, the Commission's concerns revolved around four main issues:
(i) The need to guarantee that the regulating functions fall upon a body with no commercial stake in the sport, in order to avoid any conflict of interest between the ones who partake in it and the ones who lay down the rules;
(ii) The need to ensure that the agreements entered into by FIA, FOA and the teams, circuit owners and TV networks do not limit the ability of other undertakings to organize, participate and broadcast F1 events. Moreover, the Commission displayed concerns over the restrictive effects of such agreements on the inception and existence of rivaling competitions, which were not allowed to race in F1 circuits, to enter F1 teams or to be broadcast on channels that covered F1 races;
(iii) The need to ensure that FIA shares the Intellectual and Industrial Property rights arising from the competition with teams and other intervening parties; and
(iv) The need to limit exclusive broadcasting to 5 or 3 years, as opposed to the 10 years which were generally agreed upon.
While the inquiry lasted, SLEC (owned by the Ecclestone family along with three banks) became F1's major player. The Commission is now satisfied that FIA currently limits its capacity to regulatory functions which will allow the creation of potential inter and intra-brand competition between Formula One and similar races and series. Furthermore (...) 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 reduced the length of free to air broadcasting contracts to a maximum three years (except for contracts where specific investments justify a length of up to five years).
F1, albeit a global sport, is structured in a very "European way". Utility purposes are still coupled with profitability goals, which is odd in a sport that is not seen as playing a relevant cultural or social role - if any sport should be "downplayed" as simple business, F1 is it. Is the separation of regulatory and commercial interests truly needed? Or should we just accept that the two go hand in hand? The professional leagues in America are the ultimate examples of this. There is no better motivation than the suggestion of money. But in Europe other considerations come to play with unwarranted strength. So it won't be a surprise if less and less European circuits feature in the list of F1 races in the future. It seems we are the only ones who snub the driving force behind all things in modern days...