NASCAR operates on what they call a Charter System that guarantees 36 drivers will start the race with four “open” spots remaining for other drivers.
While most of the teams signed a new charter agreement this year; two teams have held out and are now suing NASCAR. 23XI Racing and Front Row Motorsports have filed a federal antitrust lawsuit against NASCAR the chairman Jim France.
The suit claims that “the new charter system limits competition by unfairly binding teams to the series, its tracks, and suppliers.”
With the introduction of the Next Gen car, NASCAR requires all of the teams to buy their parts from specific suppliers and face serious penalties if the modify or even touch the parts past installation.
The current charter system is the result of two years worth of “contentious negotiations” between the 15 teams and NASCAR – the National Association for Stock Car Auto Racing. In the end, 13 of the team owners signed the new revenue sharing deal; but many of them noted they did so “under duress or felt threatened into doing so. Rick Hendrick – owner of Hendrick Motorsports – said that he signed the agreement because he was “worn down”.
23XI – owned by basketball great Michael Jordan and Cup Series driver Denny Hamlin – and Front Row noted in the suit, “the France family and NASCAR are monopolistic bullies. 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.”
The two teams hired antitrust lawyer Jeffrey Kessler to help fight the deal. Kessler is behind the equal pay for the Women’s Soccer team and the deal with the NCAA to allow college athletes to earn money.
Speaking on the suit, Kessler said the suit seeks details, “related to their exclusionary practices and intent to insulate themselves from any competition.” Kessler is seeking an injunction allowing 23XI and Front Row to operate under the new charter during litigation.
The suit seeks damages for “anticompetitive terms that have ruled the sport since the initial 2016 charter agreement.”
Known for his competitiveness, Jordan said, “everyone knows that I have always been a fierce competitor, and that will to win is what drives me and the entire 23XI team each and every week out on the track. I love the sport of racing and the passion of our fans, but the way NASCAR is run today is unfair to teams, drivers, sponsors and fans. Today’s action shows I’m willing to fight for a competitive market where everyone wins.”
NASCAR is a multi-million dollar business that costs owners and sponsors $15 to $20 million each season to run a single car.
When NASCAR introduced the charter in 2016, 19 team owners signed the deal; only eight of them remain.
In 2018, Furniture Row Motorsports sold its charter for $6 million when they shut down the team. Those same charters are going for $40 plus million this year.
Bob Jenkins, who owns Front Row Motorsports – noted that since forming the small market team in 2005, he has yet to turn a profit; not even in 2021 when his driver Michael McDowell won the Daytona 500. Jenkins joined 23XI in the suit noting that he just wants a fair deal. He said, “I have been part of this racing community for 20 years and couldn’t be more proud of the Front Row Motorsports team and our success. But the time has come for change. We need a more competitive and fair system where teams, drivers, and sponsors can be rewarded for our collective investment by building long-term enterprise value, just like every other successful professional sports league.”
Team owners asked for more revenue, a voice when it came to making the rules, and a “cut” of the money NASCAR gets from names, images, and likenesses (similar to what college players have demanded). The owners also asked for the charters to be permanent; Jim France refused them.
The suit alleges that NASCAR gave the owners a “take it or leave it” attitude when it came to the 100 page agreement; and threatened the teams with losing their charters if they did not sign. The suit also states, “the 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.”