Michael Jordan’s 23XI Racing, one of two teams suing NASCAR over revenue-sharing model

CHARLOTTE, N.C. — Two NASCAR teams — one owned by Michael Jordan — filed a federal antitrust lawsuit Wednesday against the stock car series and its president Jim France, saying the new charter system limits competition by unfairly linking teams to the series, to its tracks. and its suppliers.

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

“The France family and NASCAR are monopolistic tyrants,” 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 presented its final offer on what is essentially a revenue-sharing model in early September; Thirteen organizations signed, most saying they did so under duress or feeling threatened.

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 renowned antitrust lawyer who has represented players in all four major North American professional sports, helped push the NCAA toward an era of paid college athletes, and won a historic equality deal. compensation for members of the United States women’s national soccer team. .

The lawsuit seeks details from NASCAR and France “regarding their exclusionary practices and their intent to protect themselves from competition.” Kessler said he would seek a preliminary injunction that would allow the two teams to compete in 2025 under the new charter agreement while the litigation continues.

The teams said they would seek treble damages for the anticompetitive conditions that have governed the sport since the original 2016 charter agreement.

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

A NASCAR spokesperson 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 commercial elements for the top motorsports series in the United States, while guaranteeing 36 entries in each lucrative Cup Series race. Of the 19 team owners who were initially granted a charter in 2016, according to the lawsuit, 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 after winning the Cup Series championship — proof, the plaintiffs say, that the charters have left the teams without a path. to profitability.

The original charters lasted from 2016 to 2020 and were automatically renewed to continue until December 31, 2024. As expiration approached, the teams argued that the revenue sharing was unfair and demanded more big part of the pot.

Front Row owner Bob Jenkins claimed he has never made a profit since his team was founded in 2005. He won the 2021 Daytona 500 with driver Michael McDowell and failed to break even during this record season.

With four sons and a desire to leave something for his family, Jenkins said he wanted a fair deal.

“I have been a part of this racing community for 20 years and I could not 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 in which teams, drivers and sponsors can be rewarded for their collective investment in creating long-term corporate value, just like in any other successful professional sports league .”

WHAT DO TEAMS WANT?

During negotiations, teams asked for more revenue, a voice in governance and rule-making, and a reduction in the deals NASCAR wins over participants’ names, images and likenesses.

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

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

“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, said he signed only because he was exhausted from negotiations. 23XI Racing and Front Row stood their ground, but their motivation remained unclear until Wednesday’s court filing.

WHAT IS THE LAWSUIT CLAIMING?

The suit contends that NASCAR violated the Sherman Antitrust Act by preventing any stock car racing team from competing at the track “without agreeing to the anticompetitive terms” it imposes.

“Faced with a take-it-or-leave-it offer and the absence of a competing opportunity for premier stock car racing in the United States, most teams concluded that they had to sign,” the lawsuit states. “One team described his signing as ‘coerced,’ and another said it was ‘under duress.’

“A third team said: NASCAR put a gun to our head and we had to sign. A fourth described NASCAR’s tactics as those of a “communist regime.” None of these teams would allow their identities to be publicly revealed for fear of retaliation from NASCAR.

HOW DID HE 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 by his grandson, Brian France, and now by 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 contends that NASCAR operated until 2016 under annual contracts that provided no long-term viability for any team. There was no guaranteed entry into a Cup Series event or prize money, and teams were dependent on individual sponsorships that they had to find on their own.

This model made sustainability virtually impossible for any owner attempting to operate exclusively as a racing team without additional outside businesses. Seeking sponsorship became a full-time job, and teams often found themselves in direct competition with NASCAR for financial deals.

The teams felt like they were operating in a “constant state of financial vulnerability” that caused some of the most successful organizations to fail, the lawsuit says. He cites NASCAR Hall of Famer Jimmie Johnson, who has mostly retired as a driver and is part owner of a new Cup Series team.

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

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