F1 dispute with Andretti Global draws in U.S. lawmakers

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F1 dispute with Andretti Global draws in U.S. lawmakers

Former race car driver Mario Andretti listens during a news conference on May 01, 2024 in Washington, DC. Rep. John James (R-MI) hosted Andretti on Capitol Hill to respond to the Formula 1 management denying his family and General Motors the opportunity to join the global motorsports series. 

Anna Moneymaker | Getty Images

A dispute over whether to accept American motorsports giant Andretti Global as Formula One’s 11th team is reaching boiling point.

Tensions reportedly spilled over at the Miami Grand Prix earlier this month as the CEO of F1’s parent company, Liberty Media, told the F1 legend Mario Andretti that he “will do everything in his power to see that Michael [Mario’s son and head of Andretti Global] never enters Formula One.”

Liberty Media declined to comment on the report by NBC News dated Thursday, which cited sources with knowledge of the incident, although an anonymous source close to Liberty Media said that the conversation occurred differently from how Andretti had described it.

It’s the latest twist in the Andretti saga, which started in October 2023 when the sport’s governing body, the FIA, approved the American team’s bid to join the grid. Three months later, F1, the sport’s commercial arm, quashed the bid, arguing that Andretti wouldn’t be competitive in 2025 or 2026. It argued that it would need to fight for race wins and podiums to bring any significant benefit to the sport.

‘Cartel-like behavior’

A group of U.S. lawmakers have accused F1 of “cartel-like behavior,” suggesting the sport has benefited from access to America’s giant and lucrative marketing without sharing the spoils. 

And in recent weeks, the House Judiciary Committee opened an inquiry into the saga, and senators have also called for an antitrust investigation. U.S. Congress has also written to F1 requesting an explanation. CNBC has reached out to F1 for comment.

Andretti Global has also secured a major scalp with the hire of former F1 CTO Pat Symonds earlier this week.

Speaking to CNBC, Mario Andretti said that “we were supposed to have a meeting in Miami, but they [F1] didn’t take it because they were upset about receiving a letter from the government.” 

The letter, signed by 12 members of the U.S. Congress, points out that the FIA had “already analyzed — and approved of — the technical capabilities of Andretti to compete among current teams, and most current teams in Formula One do not meet Formula One’s standard of regularly competing for ‘podiums and race wins.'”

It is these teams that have been most vocal about the Andretti bid. “Williams is against the addition of an eleventh team,” said the team principal at the end of last year, adding that he would support the bid “but only at the point where the 10th team on the grid is financially stable.” 

It is true that F1 has done well out of America. The average value of teams rose 276% between 2019 and 2023 to $1.88 billion, according to Forbes, as the prospect of a second U.S. race in Miami drew America’s giant corporations to the sport. “If you look at the partners that we’ve brought on most recently, Coca-Cola, Dell, Cisco, Goldman, these are all U.S. based companies that previously had very little knowledge about what Formula One was,” McLaren CEO, Zac Brown, told CNBC. 

‘Not come for free’

The average value of these sponsorship deals doubled after the introduction of a third U.S. Grand Prix in Las Vegas last year, according to analytics firm Luscid, and the government’s letter said that “limiting the number of teams in Formula One will increase the price of sponsoring or buying into an existing Formula One team.”

But does this amount to anti-competitive behavior? As F1 CEO Stefano Domenicali told CNBC, “what we’re seeing has not come for free.”

Estimates suggest that F1’s American owner, Liberty Media, invested as much as $600 million to put on the Las Vegas Grand Prix, and while Domenicali refused to comment on the Andretti bid, F1 has stated it believes “F1 would bring value to the Andretti brand rather than the other way around.”

Teams worry that an eleventh team would dilute their share of the TV revenue and prize money. Under the existing Concorde Agreements, which determine the revenue split, a new entrant would need to pay a $200-million “anti-dilution” fee, a sum most teams don’t feel reflects the increase in their value since the deal was agreed in 2020. Rumors that Apple may be willing to pay as much as $2 billion to secure future broadcast rights and speculation that Saudi Arabia is weighing up buying the sport entirely for around $20 billion will also play into stakeholders calculations.

Pressure from the U.S. government could force F1’s hand however, and teams want assurances that their share of the growing revenue won’t be diluted. One solution which has been proposed by F1 veterans Tim Milne and Lewis Butler is that three new teams are allowed to enter as “non-constructors,” making them ineligible for a share of the prize money. These new entrants would also be obliged to operate out of a region not currently represented by F1 teams. 

Formula One F1 – United States Grand Prix – Circuit of the Americas, Austin, Texas, U.S. – October 23, 2022 Tim Cook waves the chequered flag to the race winner Red Bull’s Max Verstappen 

Mike Segar | Reuters

Another option is to agree to a higher anti-dilution fee. This has already been mooted by the heads of larger teams such as McLaren’s Zac Brown. “The dilution of an 11th team is about $10 million a year,” he explained.

“So, if I get $70 [million], it will be covering me for seven years. Then if it costs $700 [million] just to enter, it’s created $700 million more in franchise value.”

This will be a tricky move to pull off, however, as the U.S. government will be unlikely to accept a higher entry fee based on growth they see as driven by the American market.

“If you want access to our markets, if you want access to our fans, you must grant access to our companies, you must grant access to our automotive workers, you must grant access to Americans themselves,” said John James, one of the 12 American members of Congress to have signed the letter.

It isn’t just in Washington where support for Andretti is growing, explained Andretti. “In Miami, I embraced Fernando Alonso and he said ‘it’s just maddening they’re giving you so many problems.'”

Las Vegas has invested billions to become a sports and entertainment hub

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