In February this year, the Federation Internationale de l’Automobile (“FIA”), international motorsport’s governing body, announced the organization was to open up the process to expand Formula One (“F1”)’s World Championship, allowing new teams to apply to join the competition in the coming years. The FIA evaluated the “sporting and technical ability” of applicant teams, their ability to raise and maintain capital to be competitive, and their experience and personnel. Ultimately, four teams applied. The FIA announced this month that only Andretti Global (“Andretti”), owned by former F1 champion Mario Andretti and his son Michael, had passed the organization’s scrutiny and had been invited to join the World Championship, pending negotiations with the commercial rights holders of F1. Andretti is an American-owned team with operations in Indianapolis, and was backed in their bid by General Motors’ luxury brand – Cadillac. Andretti also had financial backing from private equity firm Guggenheim Funding; and French manufacturer Renault agreed to serve as engine supplier. 

However, there has been serious resistance among existing teams to Andretti joining the World Championship. Most of that concern centers around the Concorde Agreement that the current ten teams and the FIA signed in 2020. The Concorde Agreement determines the distribution of television revenue from broadcast partners and prize money from the World Championship. The Agreement requires any new entrant to the World Championship to pay a $200 million “dilution fee” which offsets the new in money allocation and decreased respective sponsorship revenue that results from the change from ten to eleven teams. Many teams believe this fee should now be $600 million given the rise in the sport’s popularity since the Agreement was signed, a suggestion backed by F1 CEO, Stefano Domenicali. Incumbent teams have also expressed concerns that Andretti will not bring enough additional revenue to the sport to overcome their losses from splitting revenues with an additional team. Andretti countered by pointing out the new team is American-based, backed by a major American automaker with a storied history in racing. Andretti argues that this would make them viable, not only competitively, but also that they would bring additional sponsorship and audience to F1 which would bring an increase in revenue and interest in the sport. Also, F1 has long courted various international car brands, so the inclusion of General Motors could be a big positive for the sport. In fact, recent reports have suggested that behind the scenes, F1 has been going out of its way to gauge interest from General Motors in aligning with another existing team. It’s likely that F1 believes in the value General Motors could bring, but there may be some other reason they don’t want Andretti.  

The concern is that the FIA has permitted Andretti to join the sport, and their President, Mohammed Bin Sulayem has said “it would be very hard [for F1 teams] to say no” to Andretti commercially. But what if they do say no? The most obvious recourse is that Andretti would have a claim in European courts for anti-competitive practices and unfair restraints of trade. F1 is a “closed league” similar to North American sports, where teams don’t change year to year based on performance. In Formula 1’s case, this gives the teams themselves, not just their governing body, the power to approve new entrants. In addition to passing technical and financial backing requirements of the FIA, new entrants also must agree to join the Concorde Agreement, and those negotiations are handled by Formula One Management, at the behest of the teams themselves. This gives the teams essentially a veto power over any new entrant, even if their governing body finds that the teams are more than capable of competing technically and economically. Andretti had to submit hundreds of pages of documents showing their technical, monetary, and personnel were in line to be competitive upon entry to the FIA. While three other teams were found insufficient, Andretti was able to prove their worth to gain entry. It is reported that Andretti is already testing a fully produced F1 car, built to 2023 standards. Furthermore, it’s rumored that Andretti has already begun hiring engineers from teams already on the grid to aid in its development. Thus, exclusion of Andretti could signal to other possible entrants not to invest many resources into an F1 project, as they could be excluded even after spending a large amount of money on resources to prove their competitive viability. This would be hinder competition at the highest level of international motorsports and an audience that has signaled support for Andretti to join the grid. If Andretti isn’t allowed to enter the grid via a new entry, their only way into the sport would be to buy an existing team, as has been suggested by an existing team boss, Toto Wolff. But exclusion for this reason would be evidence of a textbook restraint of trade, showing that the teams are limiting outside entry into their market in order to force a would-be competitor to pay them directly for entry. Also, by limiting the possibility of entry only to paying for an existing team, the values of the current teams would increase significantly because they would represent the only vehicle for entry into the sport. Thus, by restraining outsiders from entering, the teams would see direct increases to their profitability upon selling. This is exactly what anti-competition law seeks to combat. Additionally, exclusion of Andretti would also limit innovation in the sport, and raise the question that if a team backed by a former champion that competes globally can’t get into the sport, who could? 

In F1, unlike other motorsports, teams are also “constructors,” meaning they are responsible for putting together the chassis and components of their cars. Thus, innovation and creativity are at the heart of F1. Teams have to build from scratch, and their technical innovations are often copied by other teams. For instance, when Oracle Red Bull Racing introduced a creative “side pod” design last season – to great success on track – it was quickly copied by other teams. Innovations such as these create more excitement around racing and a better product on the track. Andretti could seek injunctive relief against F1’s management, where the court would essentially force F1 to let Andretti into the sport due to the teams’ anticompetitive practices. Additionally, Andretti would likely be awarded monetary damages for the money they’ve expended, as they’ve yet to see returns on investment due to the monopolistic cartel behavior of Formula 1’s management and their existing teams. Not to mention, the practical risk of court scrutiny forcing existing teams to open up their books and reveal details that have the potential to expose other illegalities or bad business practices could harm their reputation with existing or future sponsors. Any potential reputational harm from a lawsuit and related discovery could also upset investors and sponsors which would have the same negative effects the teams hope to avoid by excluding Andretti. 

With these factors, Andretti would likely have a good case, and it’s this threat that may ultimately help them clear the final hurdle to entry. While there is still a hope that this situation can be worked out between the existing teams and Andretti with some monetary solution, both sides should be prepared for a legal battle to play out. It would be a positive for fans, drivers, and the sport as a whole if Andretti is able to join the sport in the coming years. 


Author Biography: John Tuley is a Moderator of the International Law Society’s International Law and Policy Brief (ILPB) and a JD Candidate at The George Washington University Law School. He has a B.A. in Writing and Rhetoric and a B.S. in Legal Studies from the University of Central Florida. 

Editor: Samantha Hoover