IS THE REVENUE ALLOCATION SCHEME OF FORMULA ONE MOTOR RACING A CASE FOR EUROPEAN COMPETITION POLICY?

Oliver Budzinski and Anika Müller‐Kock

Contemporary Economic Policy, 2018, vol. 36, issue 1, 215-233

Abstract: Recent allegations from participants of the FIA Formula One World Championship (F1) suggest that its authorities violate European competition law in two ways. First, they allegedly abuse market power by forcing unfavorable contracts on media revenue allocation upon teams as a whole and on smaller teams in particular (vertical allocation of media revenue). Second, they allegedly form a cartel with selected teams to the detriment of smaller teams by providing unjustified extra payments to these teams (horizontal allocation of media revenues). In doing so, the cartel members allegedly secure supracompetitive rents from the authorities and cement an unfair competitive advantage over the outsider teams. Employing concentration measures from empirical economics, we present an assessment of whether the current antitrust allegations against F1 may be considered valid or not. We show that the allocation scheme employed in F1 considerably differs from those in other professional sports championships. We find the empirical picture to be consistent with an anticompetitive interpretation of F1 media revenue structures and policies. We conclude that there is merit in initiating an in‐depth antitrust investigation of Formula One motor racing. (JEL K21, L12, L40, L83, Z20)

Date: 2018
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