There are some who seem to think that the Liberty Media purchase of the Formula One group could be stopped by the European Union, perhaps having been prompted by those pulling their strings to try to stir up trouble.
So, let’s have a look at the realities of the situation.
There have been rumblings about the EU getting involved in the sport since July 2013 when the Concorde Implementation Agreement was first put in place, creating the F1 Strategy Group.
No action was taken.
The first hint of any protest came in November 2014 when a British MEP, Anneliese Dodds, wrote to the new European Competition Commissioner Margrethe Vestager, raising questions about competition issues in Formula 1.
Nothing happened. Another 11 months passed.
In October 2015 Sauber and Force India lodged official complaints with the EU Competition Directorate, alleging that Formula 1 is dividing revenues and making rules in “an unfair and unlawful” manner. The complaint challenged not only the financial side of the business, but also the governance structures.
Eleven months have passed.
It is only in the last few days that letters have been sent out to the various parties involved, asking questions. A cynic would suggest that this sudden burst of activity may well be based on the fact that there are going to be new people in charge of the Formula One group and thus new ideas and a willingness to make changes to keep the authorities happy.
In general, the European Commission has always tried to stay out of sport, leaving the governance to sporting federations. It is only when these bodies get out of control that the EU acts, although in the cases of big international organisations such as FIFA and UEFA, it has been the Americans who have been the ones to wade in. Having said that, Formula 1 did run into trouble with the EU competition department back in 2001 and, after a lot of huffing and puffing (most of which was unnecessary), the FIA and the commercial rights business were forced to change some of their regulations and agree on proper ways to do business. After that, there was no interest at all from the EU and the purchase of the Formula One group by CVC Capital Partners was waved through in 2006, subject to CVC selling its interest in MotoGP, which it duly did.
Everything was fine until the Concorde Agreement ran out in 2010. After that the Formula One group concluded individual deals with the major F1 teams, including different levels of revenue beyond the established payment schedules,
based (in theory) on the teams appearances at races and on their results on the race track. In addition to these financial benefits, the Formula One group concluded deals that gave six teams seats on the Strategy Group: five by rights of various kinds and the sixth going to the best performing smaller team from one year to the next. These agreements were cemented in July 2013, with the Strategy Group becoming a “new central governing body” with 18 voting rights split equally between the Formula One group (six votes), the FIA (six votes) and the six “main F1 teams”, which had one vote apiece. This became public information early in 2014 when FIA President Jean Todt admitted to the media in Bahrain that he could do nothing to help the small F1 teams.
“I do not have the power to change the regulations,” he said. “This year there is a new decision-making body, the Strategy Group.”
The fact that the FIA failed to protect the smaller teams was the primary reason that the surviving smaller teams decided to take action. They had nothing to lose.
The other element of the July 2013 Concorde Implementation Agreement that was questionable was that the FIA was given an option (later taken up) to buy a one percent share in Delta Topco, the parent company of the Formula One group, for $460,000. All the indications are that this share came from Bernie Ecclestone, rather than from CVC, but there was an agreement for the FIA to retain the share until CVC sold out.
The agreement also guaranteed a pre-existing right of veto for Ferrari, “in respect of the introduction/modification of any technical or sporting
regulations (except for safety requirements)”.
The arrangements, which clearly weakened the FIA’s regulatory powers, while making it a partner in the F1 commercial business, were not
sent to European Commission for approval, the federation apparently concluding that its own lawyers were sufficiently qualified to decide on the matter.
A new set of owners will obviously be keen to smooth everything over with the Commission and fix anything that is deemed to need fixing. They will, no doubt, agree to whatever the EU wants, if only because it will give them more money and more power. There must, in any case, be a new commercial deal struck with the teams before 2020 and this will need to be in line with what the EU wants and the rules of transparency on the NASDAQ. Liberty Media clearly has a very different approach to business than CVC and Bernie Ecclestone and, if it is necessary, the active involvement of these two entities can be terminated in the autumn of 2019. If Liberty is up front and shows a willingness to change things, then the EU will most likely be happy to wave through the new deal.
The EU might possibly decide to look retrospectively at what happened between 2013 and now, but the Competition Directorate has much more important things to worry about and does not want to be involved in the sport. The EU might fine the FIA for giving up some of its governance in exchange for a share in the commercial side of the business, but it is more likely that it will simply rule that the FIA must sell its share and govern the sport as it is supposed to do. The federation is contracted to lease all commercial activities to the Formula One group until 31 December 2110 (something that has been approved by the EU) and changing that would require one party or the other to go out of business. That is not likely to happen if the new owners agree to put the house in order and pay the FIA a sensible sanctioning fee. The big teams may not like being forced to accept changes to their deals, but if the EU says it must happen, they know very well that it is best not to fight and risk fines and, in any case, they are all going to negotiate new deals with Liberty and so they will be hoping to end up better off. The EU might choose to fine CVC and Ecclestone, but that would no doubt entail years of legal fights that no-one wants. So what is the point?
When all is said and done, waving the new commercial deal through with a few conditions to be met is the best way forward for the EU. Sorting out the governance issue is not really a big deal as the FIA has little choice but to do as it is told. Sorting out the money is something that Liberty can and will want to do – and the EU will support it.
joeblogsf1 
And people still wonder why the UK voted to leave the EU.
Because they wanted to be poor for a generation or two?
Best to avoid this one Joe – employment in the EU high, particularly youth employment in Spain, France and so on. There’s no real basis for your analysis based on current stats, when you consider we haven’t actually left yet. The Euro is actually keeping Europe poor eg France which is heavily in debt.
As no one has a clue what will happen, best to avoid scratching for stats that support your argument. Only time will tell and all opinions are just as valid as each other
So one could opine the equally valid opinion that they want to be rich for a generation or two too then.
You can
One doesn’t have to scratch Joe, they are there for all to see. Monetary policies are based on stats, trends are based on stats. Informed opinions are based on stats not whether one doesn’t like the facts.
This topic is closed
Stats can be used in many ways. Here’s one – Spain (where I live) has 40% unemployment in the south, contrary to the optimistic post above. As Joe says, we’ll see it time.
Joe, if you’d allow me – I meant un-employment is high! Mark, you’re right of course. Better check my spelling next time!
Yep I agree Joe
As a Brit & proud of it even though I was pro staying in EU. I have to deal and accept we are going to leave and get on with it.
But…
Britain will end up in the wilderness for a few generations. As most countries will deal with a bigger EU market than just Britain. The untangling with the trade agreements and Britain is a mine field made up mostly of mines and very little field.
The untangling will prove laborious and painful like a pair of Siamese Twins. Outside chance of the two surviving the surgery. One will suffer more than the other and may loose out in the long run.
It’s easy for the proseparationists to gild everything in gold only for them to wake up to tumble weed running across their pathways when the divorce is official.
-USA will deal with E.U first.
-Asia will deal with E.U first.
-Mainland Europe will deal with EU first.
-Australia will deal with the EU first.
G20 meeting reiterated the above points in a deliberate fashion while PM May looked like a puppet on a string going from one ” media photo leader opportunity” to the next. Always looking uneasy.
(EU will make an example of us to stop others from leaving as it is built on a house of cards. Loosing one country in the right harsh way may prevent the whole thing falling apart and scaring off any other country trying it).
Though I take my hat off to PM May for stopping the Osborne Chinese deal , controlling our Nuclear energy requirements. They can definitely “do one” in my eyes. No one should have that control but Britain.
Will be a long and messy divorce.
But let’s get on with it..!!
What a lot of rhubarb!
That’s a view that isn’t born out by post Brexit reality….the financial disaster zone is, and will be, the Eurozone….until the Euro is put out of it’s misery. Joseph Sieglitz has a lot to say on the subject, and thinks we are wise to distance ourselves from this doomed project.
That’s enough on this subject
A whole lot of string pulling that, I expect, will fray and end.
Hi Joe,
good insight, thank you. Given your timeline of “EU did nothing”, isn’t it more likely that the EU just sit back and wait? And “do nothing” as usual.
By 2020 there won’t even be an EU. I highly doubt any of the officials scrabbling to retain their tax payer funded luxury life styles are going to care much about F1 when faced with that.
Call back in 2020 and you’ll be amazed about the EU still being there…
A clear explanation with no Sylt muddying the waters!!
Silt always sinks in the end
Will the silt settle under Malone’s desk now?
Only if Malone is a idiot
I did notice he appeared on a BBC World News/probably Sport Today report on the F1 sale a few days ago.
Do we really think that teams investing in the ownership is a good idea? What are the implications for future new teams joining?
I pass no judgement on the matter
Good question! I would be surprised if Mercedes and Renault would wish to get involved in shareholding in such an unholy mess of corporate governance at least until tbe smoke has cleared and even then they might have doubts. I think they will prefer to remain at arms length to maintain plausibly deniabilty. As for Ferrari and Honda i could not guess what they might tbink! As for new teams joining i think it is too difficult and too expensive unless they build a ‘Haas’ customer car so it looks like a closed shop to me!
Now that we have American owners will we see the weight limits raised so we can get some American cheeseburger eating drivers, instead of just a bunch of emaciated European models?
Hi Joe,
By the look of things, the Ferrari Veto will be eliminated & the strategy group will be disbanded by Liberty. Wonder what these teams will do next. Will they come on board for the next Concorde agreement? Considering that Mr. BCE is still there, wonder what sweeteners he will offer to the manufacturers (esp the united Ferrari-Merc front).
I struggle to see exactly why anyone should get excited, by the thought of a sport being run by an 84 yr old bloke with a bad haircut, and a gang of money hungry financiers, being taken over by a 75 yr old with a bad haircut, and a different gang of money hungry financiers……….and people think that this will be different? Even the Bolt has been quoted as saying that Malone is buying in so that he and his band can make money……it doesn’t sound a lot different to CVC, that is unless Malone & Co are some sort of Philanthropic Society….which i rather doubt is so.
Nearly 86…
CVC voted to leave, so just deal with it.
What does your haircut look like?
Liberty offering equity stakes to teams is not a good omen. Only the prosperous could find the finance to take shares in the business, which means the minnows will be left out yet again.
The only teams with a possible long range ownership interest would be Ferrari and McLaren, with possible interest by Williams.
Mercedes Renault and Honda are car builders and sellers who will exit when they are satisfied they have exhausted all marketing avenues.
Why by into a product that may be obsolete in a few years?
After a semi-lengthy exchange on Twitter with those (your friends?!) at FM, I managed to have it “confirmed” that, so long as the FIA shares are not dragged/tagged along (i.e. they just wait a bit) then the “conflict of interest” is rather moot. I therefore concluded that the seemingly endless postings, interviews, comments and, dare I say it, rhetoric are largely pointless. Which is as we all assumed. The conversation included criticism of my statements and a comparison to dictators.
If the EC finds there’s a conflict of interest then this, surely, is independent of whoever buys F1 at any point in future, whether it’s Liberty, Qatar or whoever. Logically, this conflict (should it exist) just needs to be resolved, otherwise this will rear up and again. Therefore, best just be sensible about it all.
Seems to me like stirring up a lot of fuss about something that sensible, capable and intelligent heads will resolve easily to the satisfaction of all. Much like the sale of MotoGP, for example.
Surprise me