By Gigi Wood
The ongoing antitrust litigation involving 23XI Racing, co-owned by NBA legend Michael Jordan, and Front Row Motorsports against NASCAR illuminates significant concerns regarding the allegedly monopolistic practices within the stock car racing industry. This lawsuit emerges mostly from NASCAR’s charter system, implemented in 2016, which guarantees entry for 36 teams into each Cup Series race and incorporates revenue-sharing agreements.[1] Critics argue that this system fosters a coercive environment, binding teams too closely to NASCAR and its affiliated suppliers, many of which are controlled by the France family, who have long dominated the organization.[2]
NASCAR’s governance has historically been characterized by a family-centric model, established by its founder, Bill France, Sr., in 1948.[3] Over the decades, this model has allowed the France family significant discretion in decision-making processes, leading to practices that many now see as detrimental to the competitive landscape.[4] While NASCAR has seen changes in leadership, the influence of the France family remains strong, raising concerns about the lack of checks and balances within the organization. This concentration of power has prompted calls for reform and collective bargaining among stakeholders. Previous antitrust cases against NASCAR, including those involving Speedway Motorsports, Inc., have highlighted ongoing concerns about the league’s market control and its adverse effects on competition.[5]
The charter system was originally intended to stabilize competition in NASCAR by providing teams with guaranteed participation in races and a share of revenue.[6] However, the plaintiffs assert that it has created a monopolistic structure that severely limits competition.[7] The system allocates revenue disproportionately, primarily benefiting NASCAR and the France family, while leaving teams struggling to achieve financial sustainability.[8] This disparity is particularly troubling given NASCAR’s lucrative television contracts, including a recent seven-year media rights deal valued at $7.7 billion, much of which flows directly to NASCAR and its affiliated entities, rather than to the teams themselves.[9]
The plaintiffs allege that the charter agreements compel teams to operate under stringent terms that favor NASCAR’s economic interests.[10] They contend that the negotiations surrounding charter renewals have been coercive, often presenting offers that can be characterized as “take it or leave it.”[11] This lack of flexibility severely undermines teams’ ability to negotiate better terms and creates an environment where competition is stifled, according to the complaint.
The financial stakes in this litigation are significant. The plaintiffs argue that NASCAR’s charter agreements are structured to maintain the league’s dominance rather than promote healthy competition.[12] This economic imbalance, they allege, has forced teams into practices such as “start-and-park,” where teams withdraw from races early to save costs, reflecting the financial strains imposed by the current system.[13] While NASCAR allegedly profits disproportionately from its media rights deals, many teams find themselves in precarious financial situations, struggling to make ends meet. The charter agreements, introduced in 2016, include provisions that compel teams to accept anticompetitive terms, including restrictions on competing in other racing series.[14] The economic strain on teams is exacerbated by high operational costs, estimated at around $18 million annually (excluding driver salaries), and a revenue distribution model that leaves them heavily reliant on sponsorships due to insufficient prize money.[15]
The lawsuit contends that NASCAR’s dominance stems from exclusionary practices rather than superior business strategies. The organization has actively acquired rival racing circuits, such as ARCA, and restricted access to racetracks, preventing competition.[16] Additionally, the introduction of the “Next Gen” car program in 2022 requires teams to purchase proprietary parts without ownership, further escalating operational costs and locking teams into NASCAR’s framework.[17] Additionally, the plaintiffs contend that the lack of equitable revenue distribution leaves teams at a severe disadvantage compared to their counterparts in other major sports leagues, where television revenue is more evenly shared.[18]
The legal foundation of this lawsuit is based on claims of monopolization and unreasonable restraints of trade, specifically under Sections 1 and 2 of the Sherman Act.[19] The plaintiffs assert that NASCAR’s practices create barriers to entry for potential competitors and lead to ongoing economic harm. They seek relief from provisions in the upcoming 2025 Charter Agreement, which they argue would further grow NASCAR’s monopoly.[20]
The first count alleges NASCAR’s actions violate section 2 of the Sherman Antitrust Act which focuses on monopolization.[21] Plaintiffs claim NASCAR maintains a monopoly through exclusionary practices, such as acquiring competitors and enforcing restrictive contracts.[22] The charter agreements are cited as anticompetitive, limiting teams from participating in other racing series.[23] The second count states NASCAR also violated section 1 of the act because they have engaged in an unreasonable restraint of trade.[24] Plaintiffs argue that contracts with racetrack owners and teams involve unlawful exclusive dealings, preventing teams from exploring other racing options and forcing them to accept unfavorable terms.[25] The plaintiffs are seeking a preliminary injunction which would allow the teams to operate under the 2025 Charter without relinquishing legal claims.[26] They also seek permanent injunctive relief to end NASCAR’s exclusionary practices and treble damages for the harm suffered under anticompetitive terms.[27]
The plaintiffs’ legal strategy aims to dismantle the alleged structural inequities imposed by NASCAR’s current operational model. By highlighting the coercive nature of the charter negotiations and the resulting financial implications for teams, they hope to establish a case that not only seeks damages but also calls for greater transparency and reforms in how NASCAR operates.[28] The lawsuit also allegedly spotlights the broader competitive practices within NASCAR. The plaintiffs claim that NASCAR has leveraged its monopoly to manipulate revenue distribution in ways that undermine competition. For example, the introduction of the “Next Gen” car in 2022 is cited as a means of locking teams into NASCAR’s framework.[29] Under this system, teams are required to purchase standardized parts, and the cars themselves remain under NASCAR’s ownership.[30] This arrangement makes it financially burdensome for teams to transition to other racing circuits, thereby reinforcing NASCAR’s hold on the sport, according to the complaint.
As NASCAR approaches the implementation of the 2025 Charter Agreements, the plaintiffs argue that the organization is intensifying its efforts to impose unfavorable terms on teams.[31] By negotiating individually with teams, NASCAR can exert greater pressure and limit the ability of teams to advocate for their interests collectively. The implications of this lawsuit extend beyond the immediate parties involved. If successful, the lawsuit could lead to significant reforms in the charter system and alter the relationship between NASCAR and its teams. This could pave the way for a more equitable competitive environment, enabling teams to negotiate better terms and fostering a healthier competitive landscape. The monopolistic practices used within NASCAR raise critical questions about the future of stock car racing. Should the plaintiffs prevail, it could serve as a catalyst for broader changes in how NASCAR operates, potentially restoring competitive balance within the sport.[32] This litigation could mark a pivotal moment in the ongoing struggle between teams seeking fair treatment and an organization that has historically wielded considerable power.
The antitrust litigation initiated by 23XI Racing and Front Row Motorsports against NASCAR challenges the very framework of how the organization governs and conducts its business. It purports to raise essential questions about competition, fairness, and the long-term viability of stock car racing. The plaintiffs contend that NASCAR’s current operational model is fundamentally flawed, creating an environment that favors monopolistic practices and undermines the competitive spirit of the sport.[33] As this case progresses, it may have far-reaching implications for the stock car racing industry and could redefine the relationship between NASCAR and its teams. If the plaintiffs succeed in their claims, the outcome may lead to a restructuring of the charter system and a more equitable distribution of resources, benefiting the entire racing community. Furthermore, the resolution of this litigation may set a precedent for future cases in professional sports, influencing how sanctioning bodies interact with the teams they govern. It represents not just a battle for fair treatment in NASCAR but also a broader fight for competitive integrity in all professional sports.
Sports Litigation Alert will be reporting on NASCAR’s answer to the lawsuit in coming issues.
Cian Brittle, What’s Going on with NASCAR’s Charter System?, Blackbook Motorsports (Aug. 5, 2024), https://www.blackbookmotorsport.com/features/nascar-charter-agreement-sponsorship-2025/
Ryan McGee, 2 Teams Suing NASCAR Ask Court to Let Them Compete Under New Charter Agreement, ESPN (Nov. 16, 2024), https://www.espn.com/racing/nascar/story/_/id/41699105/2-teams-suing-nascar-ask-court-compete-new-charter-agreement.
NASCAR.com, How the NASCAR Charter System Works, NASCAR (Sept. 22, 2020), https://www.nascar.com/news-media/2020/09/22/how-the-nascar-charter-system-works/.
Alex Schiffer, Michael Jordan Sues NASCAR: ‘Monopolistic Bullies’, Front Office Sports (Oct. 2, 2024), https://frontofficesports.com/michael-jordan-nascar-bullies-lawsuit/
23XI Racing LLC d/b/a 23XI Racing & Front Row Motorsports, Inc. v. National Association for Stock Car Auto Racing, LLC & James France, No. 3:24-cv-886, U.S. Dist. Ct. W.D.N.C. (filed Oct. 24, 2024)
[1]Alex Schiffer, Michael Jordan Sues NASCAR: ‘Monopolistic Bullies’, Front Office Sports (Oct. 2, 2024), https://frontofficesports.com/michael-jordan-nascar-bullies-lawsuit/
[2] Id.
[3] Ryan McGee, 2 Teams Suing NASCAR Ask Court to Let Them Compete Under New Charter Agreement, ESPN (Nov. 16, 2024), https://www.espn.com/racing/nascar/story/_/id/41699105/2-teams-suing-nascar-ask-court-compete-new-charter-agreement.
[4] Cian Brittle, What’s Going on with NASCAR’s Charter System?, Blackbook Motorsports (Aug. 5, 2024), https://www.blackbookmotorsport.com/features/nascar-charter-agreement-sponsorship-2025/
[5] Schiffer, supra note 4
[6] 23XI Racing LLC d/b/a 23XI Racing & Front Row Motorsports, Inc. v. National Association for Stock Car Auto Racing, LLC & James France, No. 3:24-cv-886, U.S. Dist. Ct. W.D.N.C. (filed Oct. 24, 2024)
[7] Id.
[8]Schiffer, supra note 4
[9] NASCAR.com, How the NASCAR Charter System Works, NASCAR (Sept. 22, 2020), https://www.nascar.com/news-media/2020/09/22/how-the-nascar-charter-system-works/.
[10] Brittle, supra note 4
[11] McGee, supra note 3
[12] 23XI Racing LLC, supra note 6
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id.
[18] 23XI Racing LLC, supra note 6
[19] Schiffer, supra note 4
[20] 23XI Racing LLC, supra note 6
[21] Id.
[22] Schiffer, supra note 4
[23] 23XI Racing LLC, supra note 6
[24] Id.
[25] Id.
[26] Id.
[27] Id.
[28] Schiffer, supra note 4
[29] 23XI Racing LLC, supra note 6
[30] Id.
[31] Id.
[32] Schiffer, supra note 4
[33] Id.
