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This is On Point. I'm Meghna Chakrabarty. I'm a big race fan. I started off when I was a kid. I grew up watching your dad. I grew up watching Richard Petty.
Well, that is a NASCAR fan speaking with the legendary former driver Dale Earnhardt Jr. in 2019. And of course, he was referencing Jr.'s dad, Dale Earnhardt, there. But that guy wasn't just any NASCAR fan. He is Michael Jordan, the Chicago Bulls mega legend, number 23 himself. Yeah.
Yeah, I love watching. I set my clock every Sunday to watch NASCAR and I pay attention. Well, the very next year, the fall of 2020, Jordan and three-time Daytona 500 winner Denny Hamlin launched the appropriately named 2311 Racing Team. And in its debut 2021 season, 2311 won at the Talladega Super Speedway with Bubba Wallace driving the number 23 Toyota Camry. Well,
Wallace, by the way, is the first black driver with multiple wins in the NASCAR series. Now, 2311 has had more successes and even expanded to two cars since then.
That doesn't mean that Michael Jordan doesn't have some beef with NASCAR. Because last October, 23-11, along with Front Row Motorsports, sued NASCAR. They allege that the sport's current charter system limits competition and unfairly ties teams to NASCAR series tracks and suppliers. Both teams are effectively claiming that NASCAR is a monopoly.
Of course, NASCAR completely denies these claims. Although NASCAR has been a bit opaque about its finances, the company did cut a $7.7 billion seven-year media rights deal that begins this year. Sponsorship revenue has been reported at just over $360 million in 2024.
Last fall, NASCAR offered teams a take-it-or-leave-it deal to compete in the following season. 2311 Racing and Front Row Motorsports were the only two teams out of 15 to reject the contract. That's why they filed suit.
During negotiations, Jordan criticized NASCAR's approach, telling the New York Times that, quote, this sport's going to die, not because of the competition aspect, but because economically it doesn't make sense for any business people, end quote. And here's 2311 Racing and Front Row Motorsports lawyer Jeffrey Kessler on the DJD Reloaded podcast. Somebody has got to say enough is enough and that they are going to file this lawsuit
As for NASCAR fans, their reaction is mixed.
Not only are they being sued, but they're being sued by one of their own. I'm worried for Michael Jordan and Demi Hamlin. NASCAR picked the right one messing with Mike. Mike gets down. He don't play. And I feel like he's going to come out on top at the end of this lawsuit situation. All of these gripes, in my unprofessional opinion, are accurate. But do they rise to the degree of an antitrust violation? NASCAR doesn't think so. No.
So you may be wondering why we're talking about this now. Well, just this week, the organization filed a counterclaim against 2311 and Front Row Motorsports.
So here's the thing. Sports is one of the biggest businesses in the United States. And here at On Point, we love to weird out. Actually, let me rephrase that. Nerd out about antitrust law. So whenever we get the chance to combine the two, we're going to take it, especially when it comes to a sport as big and important as NASCAR. So joining us today is Jordan Bianchi. He's motorsports reporter at The Athletic, and he's covered NASCAR for years. Jordan, welcome to On Point.
Thanks for having me on. Appreciate it. Okay. So I will admit I'm fascinated by NASCAR, but my detailed knowledge of it is lacking. So can we start at the beginning at NASCAR's founding? Because I think will help us understand a lot about the monopoly claims now.
Sure. NASCAR was founded in the late 1940s. Bill France Sr., an entrepreneur, a racer, a gas station owner, a mechanic, lived in Daytona Beach where racing was very centric at the time. He decided that it was best that all of these little tracks and associations that were happening throughout the Southeast, instead of having these independent little businesses...
should basically consolidate into one national organization. So he formed NASCAR, which was formed in Daytona Beach, Florida, which is why the Daytona 500 is down there. And since NASCAR's formation in the late 1940s, the sport has slowly grown into this
huge, massive business. It is now the second most popular former motorsport in the world, trailing only Formula One. NASCAR is the most popular former racing here in the United States, and it is a billion-dollar company, and it is still, to this day, privately owned by the France family. Aha. So that was what I was going to ask you. Does that make it then different from other sports leagues in the United States? Yes.
Yes. In other sports leagues, primarily, the owners, if you will, essentially own the league. Like, let's say the NFL, for example. Commissioner Roger Goodell works for the owners. Roger Goodell doesn't own the NFL and invite all of these other owners to participate. In NASCAR, NASCAR and the Franz family owns NASCAR. And if you want to participate in NASCAR, you've got to play by NASCAR's rules.
And there are certain rules and regulations you have to follow, both on the business side and on the competition side. And so it is very much NASCAR's sandbox. And they have made it very clear over the years, you will follow our rules or else. And this kind of sets the tone for what has to come with this lawsuit and everything. Because throughout NASCAR's history, they have been very heavy-handed in a lot of times.
where they have said, if you don't follow our rules, then you can leave. Or we're going to ask you to leave, or we're going to make you leave. And teams have had to fall in line. And this is the first time, really, where teams have stood up to NASCAR and says, no, we're not going to do this. We want something different. And now they're in federal court. Can you give us an example or two of times in the past when NASCAR has said, you know, follow our rules or else?
Sure, absolutely. The best example is this. There was a track that opened in Alabama called Talladega Super Speedway in the late 1960s. This was a NASCAR-owned track. This was a big deal. Bill France Sr. had put a lot of time and energy and money into this. And this was a massive facility, 2.6-mile, super-fast track.
First, before the first race, they had some testing there. The tires on the cars were falling apart. The tires would not be durable. It was unsafe. The drivers pushed back and says, "No, we don't feel like we can race. We don't feel like these are good conditions for us. We need to postpone this event."
Bill France Sr. said no. On the weekend of the race, there was a confrontation between the drivers. Richard Petty was involved, for example. The drivers said, no, we can't race. Bill France Sr. looked at them and said, get out of my track. If you don't want to be here, you don't have to race. You can leave, and I will find somebody else. The drivers, including Richard Petty, all packed up and left. Bill France Sr. went and found other drivers,
quote-unquote minor league drivers, if you will, to race in the event. The race went on as scheduled, and basically from there forth, NASCAR's authority was affirmed, and the drivers, including Richard Petty and all of the superstars of that era, were back within a few short weeks racing for NASCAR. NASCAR's
uh, leadership and, uh, our way or no, the highway, uh, mantra was affirmed. Jordan, you're in North Carolina. I'm sitting here in Boston. So you don't see my jaw dropping and hitting the table because, so there was a problem with the track itself. Yeah. Yeah. I mean, the track was brand new and so it was super fast and the tires were not durable enough to maintain, um,
uh, over a long run. So the tires were basically falling off the cars that, you know, the chunking and that kind of thing. And so the drivers were like, listen, we can't go out there. If we go out there and run this race as you want us to, we're going to blow tires. People are going to be crashing and people are probably going to get hurt because the speeds of this track are so high. Um, NASCAR was like, we have advertised race. Um,
Bill France's mantra was always, listen, if I'm going to put on a race and I'm going to tell fans that there's going to be a race on this day, there's going to be a race on this day, hell or high water. And that's just the way it's going to be. And he was not going to back down from this. The drivers did not feel safe. They left. He put on his race as is. NASCAR continued on. And really ever since then, NASCAR's power over the teams and drivers has not been challenged. Right.
Forgive me while I take a little another minute here to go on this mechanics of racing tangent. Jordan, so was there anything that France could have done to the track or did it just need time to be broken in to not blow tires as often? It was really more about what they could do with the tires. There really wasn't anything they could do with the track. The track had been built. The track was what it was. What you needed to do was either one of two things. Either one, figure out
different tire compound that wouldn't that wasn't gonna you know wear off excessively over a race or to slow the cars down dramatically basically reduce the horsepower Bill France senior was not open to either of these ideas because that was just how he that was his mindset at the time and so they went ahead with the race as is and
And that is it. So there really wasn't anything you could do other than maybe push things back a little bit. But that was not going to happen. So then what happened to the drivers that did race?
The drivers who raced, they had no incidents. They ran slower speeds. Some would say that, exactly. But the race went on as scheduled and Bill France, in a masterstroke, gave free tickets to anyone who attended that race because they didn't get to see their favorite drivers or the superstars or the sport at that time, gave them free tickets to future races.
And so basically he won over the public and kind of put the drivers in a spotlight of, hey, these guys didn't want to race before you. I care enough about you to put on a race like I said I was going to. And he basically positioned the drivers as the bad guys. Interesting. So in Bill France, we have not only a top-notch racing mind, but a
pretty savvy business mind here as well. Exactly. And this is why NASCAR has grown into be a billion dollar sport. Okay. So one more thing about understanding how NASCAR compares to other sports leagues in the United States, because, you know, you've laid out this very, very careful case about how NASCAR says you play by our rules or you don't play. And again, forgive me for my ignorance here, but isn't that similar to what other sports leagues do? I mean, I don't know how much leeway NFL teams have to kind of do whatever they want.
True, but at the end of the day, though, the commissioner works for the owners. So if the owners all got together and said, listen, Roger Goodell isn't really serving our needs anymore as NFL commissioner. He needs to go. They can vote him out, essentially. He's got a contract. The France family doesn't have a contract. They own this private business, and essentially, they'll tell you the teams are private contractors, right?
But essentially they work for NASCAR. And it's if you want to work for us, you want to run our races, you have to do things our way. We're not going anywhere. I see. OK, so. Wow. So that is quite different then. All right. Jordan, we've got about 30 seconds before our first break. First, tell me quickly, like how big of a deal is this 2311 lawsuit against NASCAR?
Massive. One, it's Michael Jordan's involved. Anytime Michael Jordan's involved in anything, it's massive. Two, this really could shake the foundation of the sport depending on the outcome because you have two parties, Michael Jordan and you have NASCAR, who are not used to losing, who are used to always getting kind of their way on things. And so now you've got these loggerheads coming together. And how do you come out of this? You would think that there's enough piece of the pie to make everybody happy.
But that doesn't seem to be the case. And the consequences from this, depending on what side this falls, could be massive and shape the sports for generations to come and completely reshape NASCAR's future. Well, we're going to talk about all of that in just a minute. Jordan, you've got us off to an incredible start. So hang on here for just a minute. We'll be back. This is On Point. On Point.
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You're back with On Point. I'm Meghna Chakrabarty. And today we are talking about the massive clash between basketball legend Michael Jordan and his NASCAR racing team, 2311, and NASCAR itself.
Jordan and his co-claimant are suing NASCAR, claiming it's a monopoly. It's a huge deal, not only in NASCAR, but in sports in general. And today, to help us understand this lawsuit, I'm joined by Jordan Bianchi. He's the motorsports reporter at The Athletic and his reporter.
I've been writing a lot about this. His most recent article is NASCAR sues Michael Jordan's team. Front Row Motorsports calls him an illegal cartel. That has to do with the countersuit that NASCAR filed this week. We'll talk about that in a second. But first, here's Jeffrey Kessler. He's Michael Jordan's lead attorney for 2311 Racing. That's Jordan's NASCAR team.
Now, we reached out to Kessler to join us today. He declined to do so. He sent us a statement. We'll read that later. But here he is on the DJD Reloaded podcast back in October of 2024 when Jordan filed this lawsuit. And Kessler says that NASCAR uses its position to force economic terms on teams, drivers and fans.
No surprise to NASCAR fans, there is no alternative to NASCAR, not just in this country, but frankly around the world. And it got its monopoly illegally. And the reason it got it illegally is because it tied up all the racetracks in the country, because it doesn't let any of the teams compete for any other racing circuit.
because it seizes the intellectual property of the next-gen cars so that those are locked in to NASCAR. And it engages in all of these restrictions
So that the teams have no one else to deal with and the fans have no one else to deal with. Again, that's racing team 2311's lawyer Jeffrey Kessler. And we should note that these are Kessler's claims. And of course, NASCAR vehemently denies all of this. It'll be litigated in court. But Jordan, now take us through kind of step by step here. What are the basis, the most important basis that you think is
that Kessler and Jordan and Front Row Motorsports are making this monopoly claim.
Sure. It's multifaceted, but to boil it down is they're essentially saying that NASCAR is not sharing the wealth, if you will, with the teams and that NASCAR has set up a system where they make the most money. The teams get very little of it, but yet the teams are on the hook for all of the costs of racing. They have to buy the cars. They have to buy the equipment. They have to do all of these different things. And yet they at the time got the smallest piece of the pie of, if you will, racing.
Whereas NASCAR was making all this money and not sharing the wealth. Plus, NASCAR at times would initiate rule changes without consulting the teams, which would then... Therefore, the teams would have to pay even additional more monies. They would not have any governance on terms of day-to-day operations of the sport and the direction of the sport. And essentially would not have a say in this. And they were at the mercy of NASCAR and NASCAR's decisions. And so, essentially, they...
that if we wanted to be in NASCAR, we have no choice but to follow NASCAR's rules, even though we're the stars, we're the competitors, we're the one who's spending all of this money, we should have more of a say in the direction of this sport and how the money is being divided among the various parties. Okay. This is so fascinating, Jordan, because what you're describing to my ear, it makes it sound like the better analogy. It's not so much like...
NBA or NFL teams and the league. But it sounds like NASCAR is treating their teams as players, essentially, right? Because like players in the NBA don't necessarily get to say what the league rules are. They have to sign contracts with their teams, but they have to play under the aegis of the NBA. And so I think that's a really good point.
Is that like sort of a better comparison? It would be a very fair comparison. The only thing there is whereas in the NFL or the NBA, those players have collective bargaining rights. They have bargained with their league. So there are certain parameters that everyone has to follow. In NASCAR, there is no CBA.
So essentially NASCAR can kind of do as it wants whenever it wants and the teams, they will say, just have to go along with it or else. It's hard to imagine though that the NASCAR racing teams are these like, you know, impoverished, struggling organizations because don't they get tons of money in sponsorship deals themselves?
Yes. I mean, listen, racing in itself is a very expensive venture. And 2311, for example, just built a multimillion dollar new building here in the Charlotte area. It is gorgeous. It's expansive. A lot of these teams are owned by billionaires, whether that's Roger Penske or Rick Hendrick or Michael Jordan himself. Right.
but racing is expensive and the business model is always been as such if you don't have sponsorship outside team sponsorship it's very hard to turn a profit and that's one of the points of contention among the teams is
It is so expensive to do this. The rules are such in place that we need outside funding to make this work. And we should have a better business model to make this more affordable so we aren't having to rely on corporate America to fund something we want to do and lose money. Because if we don't have sponsorship, we're losing money, millions of dollars, and this pay-to-play model that is in place really doesn't work for us anymore.
Talk to me a little bit more in more detail about the allegation of not sharing enough of the pie, about not the profit sharing. Does that have to do with the media deals that NASCAR signs? Yeah, exactly. It's a media deal. So the previous media deal that was signed is basically divided into three parties. One was NASCAR. One was the tracks. One was the teams. The teams only got a small percentage of that.
And there was the smallest of the three parties. And their point was, wait a second. We're the stars of the sport. We're spending a lot of money. We need not only a bigger share. We should probably get the biggest share. And so that was a really big point of contention. NASCAR will tell you, okay, we understand that. And here's what NASCAR has done. Their last media rights deal that took effect this year, the teams now are the largest media
get the largest piece of the pie. Their slice that now is nearly 50%, which is a significant jump from where it was.
And so this is NASCAR's counterclaim is we understand that you need more money. We are giving you more money and yet you are still not happy. And this goes back to the offer that you mentioned last year about this charter agreement, this take it or leave it offer. NASCAR said, here, we're going to give you this offer. It's going to make you the largest recipient of the media rights revenue. And this is what it is. We are done negotiating. Here's the offer. Take it or leave it. Okay. Okay.
Oh, so many more questions, Jordan. OK, because everything that you say gets me even more personally invested in this case. So so so first of all, we help define what this charter is.
It's happened every year since the founding of NASCAR? No, this is a brand new thing. So for a long time, as I said, teams were independent contractors, right? You showed up at a race, you raced, you went home, you did your thing. What NASCAR instituted with the teams pushing for this was a charter system, which is basically the equivalent of a franchise in a stick and ball sport. So the charters, there's 36 of them, are given to certain teams.
And it guarantees them certain revenue streams each year. And part of the having a charter means you have to fulfill certain obligations that the teams do and such. So having a charter, though, means, you know, you're going to make a certain amount of money and the like. And part of owning a charter as well means you're going to get a piece of that media rights deal that we talked about.
Got it. Okay. And this is the thing that Michael Jordan and Front Row Motorsports walked away from? Correct. Last September, the charter agreement was coming to an end at the end of the 2024 season. NASCAR made a take it or leave it offer to the 15 teams that own charters. 13 of the 15 teams signed the charters. Front Row Motorsports in 2311 did not. A month later, they filed a lawsuit. 13 teams, though, did sign this agreement.
So you take it for all you want, but 13 teams did at least see, hey, this was enough for us to sign this, even though maybe they didn't feel like the terms were 100% in their favor, they still did sign it. So then what does Front Row Motorsports and 2311 Racing, what do they want in
Instead, that's a really good question. And NASCAR will tell you they haven't been really clear for road motorsports in twenty three eleven on what they want. Their lawyer, who I spoke to this week, has said they have never said definitively this is what we want. We want X, Y, Z. This is what's going to compel us to sign. It's a little vague, to be honest with you.
There isn't a clarity on what they want. Now, obviously, would they like more money? Yes. They would also like permanent charters. The charter deal that's in place that the team signed last year is for seven years, goes through 2031. The teams would like to have that permanent. They don't want this to have to continue to come up for renegotiating every few years.
But other than that, there really isn't a lot of clarity on what exactly would make this lawsuit go away where 2311 in front row would put pen to paper and sign the charter agreement and move forward. OK, so, Jordan, as I mentioned earlier, we did reach out to Jeffrey Kessler, who is the attorney representing 2311 Racing.
He declined to join us, but he did send a statement, quite a lengthy one, that begins, quote, the counterclaim by NASCAR is a meritless distraction and a desperate attempt to shift attention away from its own unlawful monopolistic actions, end quote. I'll read more of the statement a little bit later, but let's talk about this counterclaim that NASCAR filed just yesterday.
And it happened on Wednesday. And NASCAR in the counterclaim is alleging that it's the team's 2311 Racing and Front Row Motorsports that broke the law by colluding against NASCAR during those negotiations that you just described, Jordan. So just after the counterclaim was filed, Chris Yates, who represents NASCAR, he spoke to reporters on a conference call. And here's part of what he said.
The plaintiff's entire theory of the case in their affirmative case against NASCAR is that NASCAR is a monopolist. That is not right, and it's proven by two things. A, teams receive materially increased revenue under the 2025 charter, and B,
Teams are continuing to buy, including, ironically, 2311 and Front Row charters at ever-increasing prices. They clearly recognize the charter system delivers value and significant value to teams. Otherwise, they would not be continuing to buy into the system and spend money on charters. NASCAR's position, according to Yates, is that the teams were offered fair terms in the last round of charter contract negotiations.
As Jordan Bianchi has told us, NASCAR increased media rights revenues amongst teams, and those teams are purchasing additional charters, which NASCAR sees as an indication that they strongly support the system. Yates also adds that NASCAR, ironically, is being forced to defend the charter system, even though that system provides, according to Yates, quote, little benefit to NASCAR itself. And I'm just going to pause here for a second. We'll hear more from Yates in a moment. But Jordan, thank you.
What's your view on whether the charter system offers little benefit to NASCAR itself?
I mean, there's a case that could be made for that. But I would say this is a benefit knowing that you can guarantee your fans, your television viewing audience, that certain drivers, certain teams are going to be there every single week, every single race year after year. So if you're a NASCAR, you can tell your fans, Michael Jordan's team is going to race here on this day and you can guarantee that they're going to be there. So NASCAR does benefit from this to some degree. Are they making less money from the rights deal than they would have otherwise? Absolutely. Absolutely.
Does it make it harder to maybe push rules across for NASCAR than it would have years prior? Absolutely. But they are getting things from this. It's not like this is just some, you know, a beloved and, hey, we're going to be nice. We're giving you all this money kind of thing. NASCAR is benefiting from this. Given how you've described the savvy of the France family, I didn't think that it would be like this act of like total, you know, self-effacing generosity. I'm Meghna Chakrabarty. This is On Point.
OK, so let's get back to what Chris Yates, of course, who represents NASCAR, said on that conference call this week after filing the counterclaim. He said they're also asserting that 2311 Racing and Front Row Motorsports, as we mentioned, violated the law by organizing, according to NASCAR, team owners to boycott a required meeting with NASCAR during negotiations. What they did, ladies and gentlemen, was illegal. 2311 and Front Row Media are horizontal competitors.
They couldn't agree amongst themselves or between themselves on what to pay their employees. And it is similarly illegal for them to reach agreements with respect to the compensation they will receive from NASCAR and to join together to boycott NASCAR.
Interesting. So Michael Jordan and company are claiming NASCAR is a monopoly. NASCAR is claiming that Michael Jordan and Front Row Motorsports behaved like a cartel. Well, antitrust suits in general are notoriously hard to win in court because plaintiffs have to prove that the organization conducts business in a way that squashes any competition. And that is what 2311 Racing and Front Row Motorsports are claiming. But when Chris Yates looks around, he says...
In NASCAR, he sees an organization facing stiff competition everywhere. NASCAR exists in a very highly competitive motorsports and sports and entertainment marketplace. And the competition is intense and fierce. And NASCAR wants to partner with teams that will help come together and grow the sport in that competition.
Now this year, from the front of the grid to the back, this is the most competitive NASCAR has ever been, including because of the next-gen car, and the charter system has helped us to deliver the best racing in NASCAR's history. NASCAR will work to preserve that even if two teams, 2311 and Front Row, seem intent on destroying the value that race teams in partnership with NASCAR have built.
NASCAR isn't interested in a settlement. The organization intends to challenge the very merits of the antitrust case, hoping to get it thrown out of court. 2311 Racing and Front Row Motorsports appear to want to stand their ground. And to Yates, the situation seems unlikely to wrap up neatly. In terms of what a successful resolution would be, I don't know. NASCAR, again, doesn't...
does not want to be in litigation with teams. It wants to work with teams to grow the sport. And I don't know if 2311 and Front Row truly want to grow the sport. So I don't know what the path to a resolution here is at the moment. So once again, that was Chris Yates, attorney for NASCAR, speaking to reporters just after NASCAR filed a counterclaim against 2311 Racing and Front Row Motorsports. OK.
Okay, Jordan, there's something in particular that Yates says that I want to get your opinion on because, man, the plot just continues to thicken. This claim that NASCAR actually is facing super stiff competition in the, quote, motorsports and sports and entertainment marketplace. I mean, in my view, like, you know, when antitrust suits get brought against Microsoft, for example, they don't, they can't arbitrate.
can't argue in return, but we're not a tech monopoly because people are also playing video games. You know what I'm saying? It does seem like the Yates is stretching there a little bit. Yeah, and listen, lawyers are going to do that, right? They're going to exaggerate a little bit to try to make their point, and I understand what he's saying, but I mean, a case could be made that if you want to race at big time, high level stock car racing, NASCAR is it. You don't have any alternatives.
uh... that said no one is forcing the teams to run nascar uh... nascar's position is eliciting you can you can be in racing you spent all this money you've got these great buildings and equipment everything now maybe the cars are different and everything else you're going to go by different equipment to some degree
But if you want to be in motorsports, you don't necessarily have to be in NASCAR. You can go run IndyCar. You could go run X-Series, that kind of thing. No one is forcing you to do this. This is an at-will thing that you're deciding to do this. No one is saying you must do it this way in this series. You have options.
This is so interesting, Jordan. Hang on for just a second, because when we come back, we're going to bring in a lawyer to help us understand the merits or not of this monopoly case. So that's in a moment. This is On Point.
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You're back with On Point. I'm Meghna Chakraborty. And today we are talking about antitrust, NASCAR, and Michael Jordan. Jordan Bianchi is with us today. He's motorsports reporter for The Athletic, and he's been reporting on this for quite some time. Let's just listen really quickly to more fan voices from the world of NASCAR because...
You know, anytime you have a name as big as Michael Jordan, you're going to get really differing opinions. And some fans think that Jordan's participation in the sport is polarizing. But others say that Michael Jordan has the potential to grow NASCAR's audience. For example, here's what they're saying over at the Here for Speed podcast.
Michael Jordan thinks it's a big deal. And I used to love or still love the Jordan brand or Michael Jordan. Like, maybe I should be interested. Yeah, bro. I feel like NASCAR doesn't fully value what Michael Jordan can bring. And is bringing it.
And then we've also had some interesting statements from members of the NASCAR racing world, such as drivers and even team owners. Here's Richard Childress, Childress, I should say, notable former NASCAR driver and team owner. NASCAR legend Dale Earnhardt drove for Childress' team and won numerous championships there. Now, Childress recently voiced support for 2311 Racing, and he did so to Dale Earnhardt Jr.'s, excuse me, Dale Earnhardt's
I'm having a day today to Dale Earnhardt's son, Earnhardt Jr., who's also a former driver, and it was on his podcast.
I'm glad to see them do it because they stood up for what they felt were right, and they have the backing that they can do it. But I think, like you said, I think it will end up working out. You know, what we were asking for wasn't going to cost NASCAR nothing, and all we wanted was to be treated fair, and that's all these two guys are asking for now is to be treated fair in it. Absolutely.
So Childress says he's glad to have seen them do it, to stand up to NASCAR. But he himself did sign the contract offered to teams this past fall.
So, Jordan, hang on for a second, because now I want to bring in Harry First. He's Professor Emeritus of Law at New York University, former chief of the Antitrust Bureau of the Office of the Attorney General for the State of New York, and co-author of the Microsoft Antitrust Cases, Competition Policy for the 21st Century. Professor First, welcome to On Point. Thank you.
Thanks. And I apologize to both of you for my inability to get sentences out clearly today. I think I'm just a little overexcited about this topic. But give us your first line analysis, Professor First, about the claims that 2311 and Front Row Motorsports are making about monopolistic behavior at NASCAR. Do you think there's merit there?
Well, first of all, I'm glad that we're nerding out on antitrust and showing that antitrust isn't nerd alone. It's fun.
affects a lot of people and a lot of us. And the second thing is my boss, when I was working for the New York State Attorney General's office, the Attorney General was a big NASCAR fan. Beyond me, I don't know anything about NASCAR except what I read in these complaints and watching Talladega Nights. So with that in mind, a little context first and then the litigation. So the context is
that this case fits within a fair amount of litigation that's going on now in the antitrust world. Part of it is against sports leagues, NFL, NCAA. We have the PGA and all sorts of sports leagues being under antitrust scrutiny. The lawyer for the
the defendants, sorry, the plaintiffs, has brought a lot of these cases. So that's the first part of it. The second part is that although we talk about monopoly, it's monopoly for economists is the power of sellers. This is about the power of buyers. So technically called, here's more nerding, monopsony. And there's been a lot of attention paid to that.
You can think about agricultural markets where buyers are very important and farmers are at their mercy. Or you can think about the third part, which are platforms. Google, think about Google or think about Apple, which control access to markets. And there's been a lot of attention and a lot of antitrust attention to their power over those who supply them. So think about
you know, the Apple App Store or Google Play. So, and then there's the fourth little part of it, which is attention to labor. So we're talking about Michael Jordan. We can think about a very tall laborer
And the drivers of these cars. Now, the plaintiffs are not exactly individual workers on the line. These are teams and they're companies, basically, that have to attract capital and workers. But there's this, you know, are you paying attention to the drivers and are they getting their fair share? So all of these things combine in this case. Now, the case-
You want to hear about this case itself, right? Yeah. Yeah. Go ahead. Okay. So we're now at very early stages. The parties are doing a lot of publicity and as they should, and, you know, trying to convince everybody of the rightness of their cause, but they're just at the very preliminary stages and the,
NASCAR has not filed yet its motion to dismiss. They've just answered the complaint yesterday. So very early. And the question is, where is it going to go from here? Looking at the complaint,
And at the countersuit that was filed yesterday, I don't think the court's going to toss out either at this point. Whether either will be successful is going to depend on a whole lot of other issues being resolved. But they're both setting perhaps somewhat plausible claims. Okay. So first of all, I just have to acknowledge your Talladega Nights reference. I was...
I was trying not to make a similar reference, but I love that movie. It's one of my favorites. Yes. I promise I will not quote Ricky Bobby during the remainder of this hour. But but Professor First. OK, so you said something interesting about this is a case about buyers markets, really. And as you heard Jordan say earlier, well, NASCAR is saying it's.
You don't have to sell what your team offers to NASCAR. You can actually go create another market. Is that a I mean, what how do you gauge the strength of that argument?
Well, that's a sort of down the road argument if we can keep the road here. Jordan talked about my way or the highway. The plaintiffs might say there is no other highway. You've tied up the highways, basically the tracks, and these agreements that you're forcing us to sign have exclusivity provisions that once we sign, we can't race in this kind of racing elsewhere.
The idea that you could go out and form your own circuit, well, they'll push that this way. They'll say, look, there are lots of other
actually lots of other racetracks. We don't control at all. So yes, go take all your cars and go elsewhere if you don't like this. No one's forcing you to do this because you can have access to these tracks. Now, they're going to say we can't really, and that there are all sorts of
problems, you know, Michael Jordan might be very tall and very popular, but he can't race by himself.
So he's got to have other teams. It's what economists call a collective action problem. So you can't just say, yes, we'll now form another circuit. No, it's pretty hard to do. There are very high barriers to entry. So that's part of the plaintiff's claim. Jordan, I want to bring you back in here. What do you think about what Harry First is saying? I mean, it makes sense, yes. But at the end of the day—
NASCAR is forcing the teams to do things a certain way. Teams have to buy certain parts and pieces from certain manufacturers. They can't manufacture their own parts at a reduced cost. They can't find a different supplier who might be able to give them a reduced cost as well.
So the teams argue is like hey, wait a second. We want to do this We want to race with you guys, but you're making us do this in a way that maybe isn't cost affordable You're telling us these parameters in a closed market instead of allowing us in a free market system to go out and to spend the money or find cost savings or do things that we want to do that is more advantageous for us in our bottom line and Instead you're doing it a certain way and oh by the way, you're also getting a cut of this and making more money from us Okay
So I'm trying to think about what recent big antitrust cases we could learn from when thinking about what's happening with NASCAR. So, Professor, first, I mean, you mentioned Google. There's two recent very large cases that were brought against Google that they lost both of them, I think. December 2023, Google lost a case.
regarding its app store, right? Epic Games had launched a case saying that the Google app store violated antitrust law, saying that they'd willfully acquired or maintained monopoly power in the Android app distribution market. And then, of course, at the very end of last year, there was the huge Google antitrust case on ads and search that it also lost.
Does one of them sort of serve as a better model than another? Well, two comments. One is the Google cases show that even firms that you think are monopolists will claim they're not. Yeah.
So certainly look for NASCAR to say there's lots of competition. You've defined the market incorrectly. And that's really the first level of all of these cases. That was true in the Google cases.
As well. Now, I'm not quite sure what you're referring to. So the Google search case, which was a government case, Google has lost and they're up to remedies in that. And Google did claim it wasn't a monopolist and search beats me, but they claimed it.
So that's sort of the first issue. In the private case that was brought by Epic, the maker of Fortnite, they brought case against Apple in the App Store and against Google for Google Play. So they lost against Apple in the App Store because the judge said, well, Apple App Store competes with Google Play. But they won in the other case involving Google Play,
where a jury found in Epic's favor and awarded a lot of money to Epic. So
The analogy, stepping back from both of those cases, the basic complaint was, by controlling the platform, we have no place else to go, and you are taking a huge cut of our money, in those cases, a 30% commission. That's what these racing teams are saying. You are taking a huge cut of the value of what we create.
Implicit in that is they're saying that's not fair. It's also not clear that's an antitrust violation, but that's another, that's like a fight about court in a way. - Ah, that's interesting. So fairness and antitrust violations may not always be 100% overlapping. - Yes, I always tell my students that one of the dirty words in antitrust seems to be fairness.
This isn't nursery school where you have to share your toys. It's business. Firms that own businesses are usually allowed to deal in whatever terms they want. Judges don't want to control those businesses. They don't want to run NASCAR.
You know, a lot's going to depend on whether they really do have this monopoly power or monopsony power and whether they're using it improperly. Okay. So I want to play one more clip. This is from Jeffrey Kessler, again, who is the lawyer representing 2311 Racing and Front Row Motorsports.
And he says that this lawsuit against NASCAR is actually, you know, part of a bigger story of massive sports business power in this country. NASCAR has to have its own model. But what's common is the history has been a group within the sports trying to keep all of the economics for themselves.
and not sharing it with others, and restraining competition so you don't get the benefits of competition in your market. That's common. And each of these sports have gone through a period, a transformation moment, where they had to decide either we're going to change and be part of that change, or the courts are going to require us to change.
That's where NASCAR is right now, right? They either have the opportunity to sit down and work collaboratively to try to agree on a settlement and create a new system that will benefit anyone to be fair, or the courts are going to do it for them. Jordan Bianchi, you get the last word today. We have about 40 seconds or so left. You can respond to what Kessler's saying there, but I was also interested in hearing from you on something you said at the beginning, that if Jordan wins this case...
It could really change NASCAR dramatically. How? Well, I mean, it depends on what the judge rules. I mean, it could be monetary, where the judge says NASCAR owes a number of billions of dollars, which would be a huge setback for NASCAR. It could say that NASCAR has to break up its monopoly, if you will, which means it would have to divest itself of all of the tracks it owns or other properties.
on the could mean that they have to give the teams a part of its ownership group or something of that nature so this could change fundamentally on askers operated we talk about nascar's been at my where highway mantra if you will that mantra could be fundamentally changed that said if nascar wins this case which is a possibility
A federal judge is essentially saying NASCAR is not doing anything illegal. And the way it's operated its business for nearly 80 years is in line with acceptable business practices. And then so NASCAR can continue on as it's operated for the last 80 years. Well, we'll have to see. Jordan Bianchi, motorsports reporter for The Athletic. Thank you so much for joining us today. And Harry First, professor emeritus of law at New York University. Thank you as well. This is On Point.
Support for this podcast comes from Is Business Broken? A podcast from BU Questrom School of Business. A recent episode looks at what academic research says about executive compensation, asking questions like, what should we make of complex pay packages? Listen on for a preview of that episode featuring host Kurt Nickish in conversation with BU Questrom professors, Anna Albrecherke and Charlie Tharp.
So let's talk about complexity. Do you believe that these kind of highly complex contracts, it sounds like, are beneficial the way they are or problematic in the sense that they're like a concoction of a lot of different incentives, a lot of levers? There's a reason for it, but it also makes it harder to understand and it makes it harder for the executives to act too in some ways. They have to understand and act with all of those incentives.
have they gotten too complex for their own good? That's a great question. Executives are used to make very complex decisions every day.
That's why they're there. That's why they are there and they are paid the big bucks. And my co-authors and I, we pose that question. Is it the case that more complex contracts have maybe a negative impact versus a simpler contract? And that is like, or there's a movement in legal contracts, right? To make it more relational and less transactional and to have it be simpler, a little bit less specific, allowing for more...
changes and adjustments as things go along rather than trying to set everything in stone and foresee every possible possibility. You know, I'm always reminded of the Einstein quote that everything should be as simple as practical but never simpler. So I think there is a little rethinking and I think we're going to see more questions on that in the coming years. Anna, what did you find out in your research? In our research, what we did, so first we developed a measure of complexity
And what we did, it was we basically looked at the number of performance metrics that companies include, the number of different time horizons, the different components of pay, as well as whether the performance metrics had relative performance conditions or not. So we, for each company or CEO contract, we assigned a complexity measure.
And so after developing that, we do find that complexity has increased substantially through time. And then we looked at what were the consequences of that. And so what we find is that CEOs that have more complex contracts actually perform poorly compared to CEOs that have simpler compensation contracts.
Find the full episode by searching for Is Business Broken? wherever you get your podcasts. And learn more about the Marotra Institute for Business, Markets, and Society at ibms.vu.edu.