Annaliese Dodds is a Member of European Parliament, representing the South East of England. Her constituency includes Oxfordshire, Buckinghamshire, Berkshire, Hampshire, East Sussex, West Sussex, Surrey and Kent. As such, she represents (at European level) a number of the Formula 1 teams. Alarmed by the failure of two F1 teams and alerted to potential problems by an article in The Times a few weeks ago that suggested that the FIA has been “neutered” by the deal to create the F1 Strategy Group, it seems that Dodds has written to the European Commission, saying that she has “grave concerns” about the governance of the sport. This has been developing at the same as a letter was sent from the small F1 teams to various parties in the sport, suggesting that there is “what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams”.
The accusation of a cartel was rejected by those involved in Abu Dhabi. They argued that the Strategy Group was a forum to discuss ideas, but they did have to admit that decisions made by this body have to be agreed by a vote and then go to the F1 Commission and the FIA World Council, although these two bodies have no right to change the proposals. They can only accept or reject them.
FIA President Jean Todt has already admitted that the FIA’s power to make rules no longer exists, telling media in Bahrain earlier in the year that “I do not have the power to change the regulations. I am convinced that Formula 1 is far too expensive, and that something should absolutely be done, but for us, as the governing body, we have more or less zero influence as to the costs.”
There is an odd contradiction there, isn’t there? We are the governing body, but we have no influence…
On its website the FIA says that it is “the governing body for motor sport worldwide” and “administers the rules and regulations for all international four-wheel motor sport including the FIA Formula 1 World Championship”. Elsewhere there are references to it being “the sole international body governing motor sport” with the “the exclusive right to take all decisions concerning the organisation, direction and management of international motor sport” and the claim that it will “organise the FIA Formula One World Championship which is the property of the FIA and comprises two titles of World Champion, one for drivers and one for constructors. The Championship and each of its Events is governed by the FIA in accordance with the regulations”.
And yet it cannot change the rules?
How does that work? Sporting federations are allowed to do as they please if they behave in a proper way, but back in 1999 there was a problem between Formula 1, the FIA and the European Commission over governance questions. There was eventually an agreement (in 2001) which stated that the FIA’s role would be “limited to that of a sports regulator, with no commercial conflicts of interest”.
Publicly, there is no obvious answer to the question of why the FIA cannot change the rules, but the answer seems to lie in a secret deal called the Concorde Implementation Agreement, which came into effect in the summer of 2013, creating the F1 Strategy Group. This excluded the smaller F1 teams from the decision-making process, gave Ferrari a right to veto rules and regulations, established the Strategy Group structure and granted the FIA the right to purchase a one percent shareholding in Delta Topco, the parent company of the Formula One group, which exploits the commercial rights of Formula 1, for something in the region of $450,000. One percent of the F1 Group is currently reckoned (on paper) to be worth $66 million and we believe that there was a further deal that granted the federation about $35 million in loan notes. On top of that the FIA received a one-off payment of $5 million, as a signing bonus.
This was all very convenient for Todt as he was facing an election at the time and this financial windfall pretty much guaranteed that no-one dared to stand against him. The problem is that the money that should one day come to the FIA is largely tied up until CVC Capital Partners – the owner of the Formula One group – decides to sell its shares, which would mean that the FIA could tag along or be dragged along in the sale process. It cannot do anything until that happens. One can only presume that the FIA, being cautious by nature, went to the Commission and asked if this deal was acceptable to the competition department.
Todt’s remarks in Bahrain set alarm bells ringing, but for those who wanted to get people digging into the problem, the timing was bad. The last European Commission was just coming to the end of its term of office and was winding down. A new Commission was put together in the autumn under Jean-Claude Juncker and this began work on November 1. It is interesting to note that The Times article was published on November 3, so whoever was stirring up trouble was not slow to go into action. Juncker’s Commissioner for Competition is Denmark’s Margrethe Vestager and it is believed that she has or will shortly meet Dodds for a discussion. There are even suggestions (that cannot be verified) that some of the teams have been summoned to talk to the Commission.
If the Commission decides that the deal is not acceptable, it could lead to the unstitching of the arrangements and perhaps to fines for the parties involved if they are deemed to have been in the wrong. In these matters, the commission is generally happier if deals can be struck without things needing to get hot and heavy, but if any of the parties involved offer too much resistance it could get ugly. The FIA does not really have the resources to pay big EU fines and while the Formula One group might have that kind of money, they are not going to be keen to spend it. The other problem is that the Commission is notoriously slow in its activities and although there may be many rumours it is unlikely that there will be any official movement for a year or two, if the last investigation is anything to go by. Perhaps the Commission is now more efficient…
Having said that if there are hints of trouble in the media, floating the Formula One group is not going to be easy (although that is pretty unlikely already given the mess that F1 is in at the moment) and this may also mean that the trouble coincides with the next FIA Presidential Election at the end of 2017, which would make life difficult for Todt and those who supported the decision to do this deal.
I hear from the Strategy Group meeting today that there was barely a discussion (and no agreement) about how to help the small teams which will not do anything to get them to stop whatever they are doing. And there are suggestions that the trouble may not be coming from the teams but rather from dissident elements within the FIA that do not like the way that Todt does business.
Time will tell if there is any meat in this potential barbecue…
joeblogsf1 
Wow. No wonder VW won’t even consider entering F1. CVC has made billions. They should cut and run and let someone else clean up the mess!
I think CVC would love to cut and run, but can’t see the way to the exit.
I weep for them
That’s two of us now….
Wow, the 30 pieces of silver Todt took to sell out the sport’s “governance” must be weighing heavy in his purse right about now.
But why is anyone surprised? I believe Mssr. Todt has a track record of self interest stretching all the way back to his rally car days.
He had the potential to do so much and has produced so little regarding F1. Pity, that.
I like a good BBQ. Look forward to watching this unravel. Hopefully for the good of the sport in the longer term.
This is the only value in all this crap.
Joe, as I have said before the EU is slow and ponderous getting to an issue the first time around. This is not the first time around, an agreement has previously been entered into by the FIA, FOM and EU and if the EU deem that has been broken, then action “should” be swift. One wonders what the penalties are for breaking the agreement with the EU? Now if this is determined to be a new and different violation of EU law, then action could well be ponderous and slow.
Now you have to think how much heat the FIA can accept before it decides to break for a deal with the EU, without FOM. I would say that Jean Todt is Bernie’s weak link, last time Max would have protected him come what may and the two entities were in lock step. I don’t think that Jean Todt has Bernie’s back in the same way. If the FIA says OK the agreements are null and void under EU law, then what recourse does FOM have? The agreements are dead. Sure FOM can say give me back my shares… but for the first time Bernie will take a black eye on his contracts…. cant be good for his standing with CVC.
As you said what a web and old Bernie the spider is hanging upside down right now…. will he fall out. You can only spin more silk for so long before you run out of spit!!!!!!
Going to be an interesting winter. Great digging Joe, Keep up the hard work. For those who celebrate it, Happy Thanksgiving.
“I don’t think that Jean Todt has Bernie’s back in the same way.”
No just as a target maybe! 🙂
Lets not forget that Todt has also broken the original Commission ruling that the FIA should not get involved commercially. The 1% does exactly that!
Also these people are of a breed that acknowledge no superior, so the German courts, the EU commission et al are just interfering nobodies.
This is one of the things that concerns me about the appointment of Arrivabene. He is so well connected that he is too much so, with multiple hats in multiple rings. He appears to be more like a Luca replacement. With an ability to do multiple deals with various parties simultaneously he could quickly pull the rug from under the feet of Jean Todt or anyone else. A sinister appointment.
So, how long before Ferrari announce Silvio Berlusconi or some Italian politician with “a thorough understanding of the governance mechanisms and requirements of the sport” (quote from the Arrivamale press release) and some useful contacts in the European Commission as team captain?
Jean Todt seems about as efficient as Francois Hollande, maybe he’s eyeing a political career and practicing?
By the by, do you make anything of McLaren-Honda’s poor test? Just to get the taste of politics out of our mouths.
With regard to McLaren-Honda it’s worth noting that in most cases (if not all) up to now the engine and the hybrid bit have been designed and manufactured by the same entity. In the McLaren-Honda case this is not so. Honda are making the engine and McLaren are making the hybrid bit.
The EU competition directorate looked into whether anyone wqs abusing market power in the paper tissue business. They found a few big suppliers held sway in some markets where production facilities were scarce. They made a few recommendations to improve the industry. So the bosses at CVC can be reassured that they won’t be overcharged for tissues when they need to cry over the destruction of their investment. The EU giveth…
Formula One seems to be going from one controversy to another; so who’s in charge, where is the strong leadership? Perhaps Max should come back…
after all nobody in the F1 media wrote badly of him during the spring of 2008.
The Times is a Murdoch rag, I think. Isn’t Murdoch supposed to be friends with Bernie?
And enemies with Max
What’s Murdoch got against Max!? The News of the World broke the Chelsea dungeon scandal, but that was to sell papers, wasn’t it? Or was Max interfering with Formula One so much “they” wanted him out…
You are over-complicating. I did not say that Murdoch had anything against Max. But Max probably has something against Murdoch. Do you think all this trouble that Murdoch has been in of late in an accident?
Human relationships are complicated affairs and none more so than in the highly competitive environment of Formula One.
Drivers, teams, sponsors, circuit owners, venture capitalists, manufacturers, the media, etc., create a complex web of interconnections each with it’s own unique relationship dynamic.
Max was a breath of fresh air compared to the previous President and one wonders why Max spoke disparagingly of Ron, Jackie and Flavio?
You can understand Max taking on Murdoch, yet Murdoch was only the messenger.
Once Upon A Time, Motorsport was all about racing drivers, racing teams, and engineering…..now it’s more like the House of Commons….no wonder fans are fed up with it all…..
Fair point
I enjoy knowing this… It’s one of the things I like about F1. I don’t follow other racing (apart from WRC… used to), because F1 has the tech, the bending rules spirit, and a crazy interesting business side.
Some might groan, however I, like some find it interesting….. Just another perspective.
+1, big time
Yes, it’s a sad state of affairs that MEPs and EU commissioners have to get involved, and we may rue the day that they did… but there is no sign of the sport’s participants fixing anything themselves. Maybe this is the least bad way forward.
Spot on. I’ve spent a lot of time recently thinking about what makes F1. What are the things that made/make F1 special, what is in the DNA, the history of the sport. How many of those things are still present, are any of the recent developments with cars and tech relevant to this DNA. If we had to describe F1 to aliens, what is it that we would say about F1 that would differentiate it from all other forms of Motorsport.
My starting point is that F1 is open cockpit, open wheel racing. I’m still working on the rest. At some stage I’d love to see an open thread where we could all nut that question out. There would be a lot of different opinions but amongst the followers of this blog I think we would end up with a pretty good set of guidelines.
I think if things develop further down the sorts of paths Ecclestone seems to be promoting we will need to “reclaim” our beloved sport. If we can’t do that in name, maybe there will be other ways.
F1 and the FIA – The FIA has been a neutered organization when it comes to all forms of motorsports for over a decade now . Just like the UCI in pro bicycle racing … the Olympic committee when it comes to all ‘ amateur sports ‘ other than the Olympics themselves [ and even then … barely ] the FIA has become a mere ‘ figurehead ‘ with the pretense of authority and control over F1 and motorsports in general . The only ones with genuine power in ‘ sport ‘ [ and I use that word loosely here ] of any kind these days are the sponsors/investors .. period !
As far as any hope of a floatation . Anyone with so much as a modicum of business sense having a look at the dropping numbers .. both for TV audiences as well as on the track … not to mention the rapidly narrowing demographics [ theres a reason the money men favored Hamilton over Roseberg in the 2014 ‘ script ‘ ] wouldn’t even so much as consider ‘ investing ‘ into a sport damned and determined to self implode under its own weight and by its own hand
Then factor in when it coms to the Big Teams … one’s board of directors and investors [ M-B ] still calling for Mercedes to withdraw from the sport … Red Bull despite the massive ‘ bribe ‘ paid out this year still talking about breaking away … the fact that Williams regardless of the favoritism shown are but a mere shadow of their former selves and an also ran at best .. Ferrari’s rapidly escalating [ and soon to get much much worse ] financial woes … the fact that McLaren is still without a primary sponsor etc etc etc … and the very thought of a floatation becomes ludicrous at best .. because in reality .. whats left ? Add in Lotus , Force India and Toro Rosso to the list of potential future ‘ failures and …..
Honestly ? The likes of Ford , BMW and Toyota are looking smarter by the minute for having left F1 …. while VW-Audi .. much as I dislike their products … are looking like the freaking geniuses of the century for staying the ___ out …..
As far as Ms Dodd’s attempts to address this issue ? Errr … lots of luck with that my good woman … and here’s hoping you’re capable of being entertained at the very least rather than aggravated and disappointed by exercises in futility
‘On its website the FIA says that it is “the governing body for motor sport worldwide”…”
And then you went off to define all of the things that the FIA professes to rule. What about the rules that F1 and the FIA have ignored — stuff like running F1 for all involved?
The FIA hasn’t acted by Olympic rules to which they signed recently. There’s always the possibility that “they” understood the rules, and that they are just chancers.
I liked the idea of giving a tenner to Caterham to keep the team running. I’ll give it when I trust the people running F1 overall.
That para in particular was an interesting read.
How does an organisation spring from no-where to give itself or be awarded such awesome powers? I say from no-where because automobiles haven’t been on this planet since the dawn of time.
Could any sporting organisation surface today giving itself similar world wide authority?
It’s seems like a ‘cartel’ (dirty word I know) of one.
Reminds me of that group of merchants from way back in York, UK, with their interesting old building and so much history. At day’s end though they were just a cartel and stand-over merchants.
Thanks Joe,I was waiting for your view on this and as ever it was worth it.
All this self interest and muddled boundaries of governance really makes me want to walk away from the sport I’ve followed for decades.
But we’ve just had a fantastic season of racing throughout the grid, new technology and the WDC being fought out to the last race between to closely matched rivals. Must say I’ve loved all the ontrack action and can’t wait for next season to start. So I’ll just have to hibernate until next year.
Apart, that is, from reading, the season review, renewing my subscription to GP+ and seeing if Santa brings me the Crippen book. He better had I am ordering it myself!
My continuing thanks for all the hard work you put into this blog.
“… she represents (at European level) a number of the Formula 1 teams.”
Does she really?
No I write that because I have nothing else to do. It is not rocket science. If you are there representative of a constituency, you represent the people and organizations in that constituency.
Doesn’t Jean Todt understand that, by not redressing F1’s woes, he may be endangering his son’s business? 🙂
Hi Joe,
I know this is a little off topic but I’ve had an idea that might help teams with smaller budgets. (The numbers are completly pulled out of the air but hopefully the idea makes sense) If you had a system where you set an imaginary budget cap of say £70m. But then teams did not have to stick to that budget, for instance the Redbulls, Mercs, Ferarris etc would spend their extreme mega budgets as usual. But the teams which spent within the £70m would then get a bonus of say £20m at the end of the year for staying within budget, which they could then use next season. So if a team had stayed within budget the previous year and then spends £90m the next year they would have the previous years bonus of £20m taken off the imaginary bonus cap for that year so in effect they’ve only spent £70m and thus qualify for the bonus again. I think this would be an incentive that the big teams would completely ignore! -But I think it would help the smaller teams bridge a (tiny I know) bit of the financial gap.
There could be some mileage in that with a little tweaking.
I think the ratio of compliance bonus to budget limit would have to be much higher to be useful.
But loads of systems can be applied: eg a weighted refund/penalty system whereby a team gets an inversely weighted percentage of their budget refunded to them (for use the next year) if under a reference level, and are fined an increasing percentage if over the reference level. Put in numbers: if your team spend is B and the reference budget is R, then you get the fraction F = (R – B) / R of your spendings refunded. ie spend 100% of R you get nothing back; spend 75% of R get 25% of B back; struggle badly maybe spend 25% of R but get 75% of your spendings(B) refunded.
R might be somewhere in £100m to £150m.
Conversely, overspends above R could be penalised: say hurtful 50% of the amount above R? …Spend 150% of R, you pay penalty 25% of R in this case; spend 200% of R would warrant penalty of 50% of R, etc.
And infinite variations thereof and more 🙂
But team spendings would need to be calculated cleverly(weekly maxima/minima,median,etc) to avoid scenario where teams shut down effectively near year’s end just to come in underbudget.
And Jean Todt doesn’t even get paid to do this job of his. Hahaha
Hence his lack of effort…..
So the EU decided that the regulation and commercial aspects of F1 should be entirely separate, yet we have FOM on the Strategy Group board (the de facto regulator, it appears) and the FIA (the de jure one) holding a financial stake worth million in the commercial side.
Which part of the EU ruling are they actually abiding by? Hmm…
Any chance they could look at FOM more widely, including (alleged) abuse of a monopoly in GP2 and GP3?
They probably can now you’ve written it
How can they say they can’t do anything about costs? In 2008 or 09 when the budget cap started to gather momentum and was eventually slapped down there was talk about standardising numerous parts. Colin Kolles said something about brake ducts that cost millions to design and manufacture but could easily be a standard item for all teams, along with brakes, suspension and even gearboxes. Mario Thiessen was for it also saying as long as they can manufacture their own engines BMW would be happy to save money on other parts that cost a lot but don’t add anything to the show overall.
What I hate about fines is that the suits get it and not those disadvantaged. Sometimes I think a better system would at least pay out some of the fines to the ones actually afflicted.
and ….. it would seem Delta Topco’s latest shareholder filing, dated 1 January 2014 shows that the FIA has 45,819,734 ordinary shares out of a total of 4,286,181,944 giving it a 1.06% stake….. and it hasn’t listed yet on the Singapore Market……. so does the FIA get 1% of Delta Topco profits as from 2014 plus walking away with a cheque $5.55mill all for the cost of signing up to said F1 Strategy Group.
over and including the Share Value Worth and sorry a cheque for $4.55mill.
I guess they get part of the dividend. But they cannot sell them
I’ve noticed that the EU anti-trust regs (for lack of a better term) are similar to the USA anti-trust laws. Are the FIA, Formula One Management, CVC, Bernie Ecclestone, Red Bull Racing, Ferrari, Mercedes, McLaren, etc., also facing imprisonment in addition to fines?
Sometimes Wikipedia delivers the goods.
Try the Olympic Oath:
“The Olympic Oath (distinct from the Olympic creed) is a solemn promise made by one athlete—as a representative of each of the participating Olympic competitors; and by one judge—as a representative of each officiating Olympic referee or other official, at the opening ceremonies of each Olympic Games.”
The Royle family delivered the only pertinent response to any question: My Arse.
I’m left agog at the level of disconnect between the rulers of F1. Ecclestone has engineered a takeover of F1 in direct conflict with the EU directive to separate Commercial and Legislative roles. It might be a cartel, but now the EU will look into it the whole sorry mess can be rectified. Fiat justitia ruat caelum.
As time goes by, I tend to think that the split in 2009 or whenever it was should have happened and it would have been for the better. Bernie ran away with the treasure chest long ago with the FIA running behind, throwing stones and cursing – at least it was doing so for a while – but now it seems it isn’t even trying anymore.
Maybe CVC or whoever should just buy out the remains the FIA has in F1 and call it a day. No one cared if it wasn’t called “Formula 1 World Championship” as long as it had “Formula 1” in the title.
It could create it’s own governing body the way NASCAR works with F1/Sprint Cup on top and GP2/Xfinity and GP3/Trucks as its feeder series – the way it works now, practically.
If the FIA gets involved in an EU-investigation (however slow they react or carry it out), Bernie will surely push all blame on the FIA as much as he can, and then all the World Championships (and everything else the FIA governs) will have a hard time, alienating sponsors quite a bit.
In other words, if the FIA sticks with F1 and F1 had a bit of chance of going down, it will take the whole of the FIA with it. It could be a cataclysmatic disaster to the world of motor sports.
“[…] dissident elements within the FIA that do not like the way that Todt does business”
As in they don’t like his lack of ballsiness? Because if that’s the case, I certainly could not agree more with them.
To allow the FIA to buy price-reduced shares seems totally unethical. It smacks of a legalised backhander.
This could become more complicated yet. In the event of a Conservative victory in May 2015, an EU referendum would be triggered by 2017 – or so we are promised. What if that referendum resulted in the UK leaving the EU? Would FOM and the eight UK resident teams be subject to EU competition laws?
This is fiendishly complicated and if I was Bernie I would be looking at some kind of mechanism to remove myself from EU jurisdiction, or waiting to see if the UK stays ‘in the club’ in 2017.
Do you mean a Conservative-UKIP alliance? I can’t see any party winning an outright majority in 6 months time.
However, it’s finely balanced between the right, slightly fracturing into two, and the left (SNP, Labour, Lib Dem, Green). Latest prediction is a Labour-SNP alliance, but I guess we’ll get the alliance of whichever main party secures the most seats in the election.
Good idea! Move FOM HQ to China, Brasil, Russia, USA, they all have races there…
let’s hope the EU gets to work …maybe they could look at the special treatment accorded to ferrari as well
there may well have been a time that a special deal to keep them in F1 was needed , but imho they now need F1 more than F1 needs them ; spread the money more fairly and maybe we will get some more john coopers and colin chapmans coming in , a sensible engine price would be a good first step 1
People often go on about F1 not being a sport due to the money, normally I would disagree, just look at the Premier League. But there is a big difference with F1 and the Premier League, both have teams with considerably more money than others however in the Premier League the rules are fair, i.e. the same for everyone. With F1 it appears certain teams have rules in their favour such as Ferrari’s veto, the smaller teams not being in the strategy group etc. If the rules are not the same then it is not a fair playing field so not a fair sport.
It’s a shame this is what we have to talk about, I followed F1 for the sport, the drivers, the cars and the technology, definitely not the politics. If I want to see back stabbing, hidden deals, back handers and uneven playing fields I’d be more interested in UK politics…
Joe,
What happened to that nice ethical chap who stood against Todt in the election?
Maybe he could talk to the commission?