NASCAR Race Weekend Central

MPM2Nite: When is a Monopoly Not a Monopoly?

48 years into a misspent life lived on the edge, I don’t think I shock very easily anymore. A healthy dose of cynicism helps one get by in a quirky world that seems to have gone mad at times. But I have to admit, when I learned a judge in Kentucky dismissed the lawsuit the Kentucky Speedway had filed against the ISC and NASCAR on Monday, my jaw dropped into full “fly-catching mode.”

For those not familiar with the lawsuit, the Kentucky track’s argument was fairly simple. NASCAR awards Cup race dates annually to tracks of their choice, and they say that they do so with “the best interests of the sport” in mind. (Yeah, this California Labor Day experiment has proved to be a real asset to the sport). Anyways, the International Speedway Corporation (ISC) owns 12 of the 22 racetracks that will host Cup events this season, with those tracks awarded 19 of the 36 points races that are on this year’s schedule. Yes, that’s more than half the season; and along with that distinction, keep in mind each date NASCAR awards gives tens of millions of dollars to track owners. Add in the concession money, TV money, etc. and we’re not talking chump change here – making ISC the leading company in line to profit from the sport’s current schedule.

In the meantime, Brian France remains the CEO of NASCAR, a privately held company that belongs to the France family. That’s ironic, seeing as the ISC is run by Jim France – Brian’s uncle – with sister Lisa on the board of directors. While the ISC is a publicly-owned company, a controlling interest in the stock is held by the various members of the France family. So… how could there be a conflict of interest there, right? I mean, it seems perfectly logical that between swerving away from palm trees on his ride home, Brian might call Uncle Jim and tell him, “In the best interests of the sport, I think NASCAR has to take a date from Watkins Glen, the Dogpatch of the Circuit, a crumbling relic, and award it to a rival track owner.” Does that seems plausible to you? If it is, keep laying out the milk and cookies for Santa Claus.

How blatant is this conflict of interest? NASCAR and the ISC share the same corporate headquarters on Speedway Boulevard in Daytona Beach, Fla. – it’s to the point they even share receptionists. To the casual observer, it might seem pretty obvious the relationship is a bit too cozy; but in the eyes of “Bubba Law” – the way it is administered in the Third World backwater-country of Florida – these two are separate companies.

Kentucky’s lawsuit tried to call NASCAR and the ISC on this grand illusion. They noted that since the same family ran both companies, and ISC was a major player in procuring race dates – which NASCAR awards – the playing field wasn’t level for an independent track operator trying to land a coveted Cup date. And there is evidence that goes beyond anecdotal that suggests this the case.

For example, look at Homestead-Miami Speedway. Originally, the government paid for a great deal of the cost of building that track as a way to generate income into an area that was devastated by Hurricane Andrew – especially after the U.S. Air Force decided not to rebuild the airbase devastated by the storm. But NASCAR decided only to award Homestead a Busch Series and Truck Series race when the track was first built, claiming it wasn’t worthy of a Cup date. Even after another major and expensive redesign, the France family refused to budge; it looked like about the only way the track was going to get a Cup date was if the owners sold out to the ISC.

Well, that’s exactly what happened. ISC bought the track in the late 1990s, the taxpayers got the shaft, and – presto-chango – Homestead and the ISC had a Cup date. Similarly, when independent investors proposed a track in the Northwest, NASCAR had no interest in scheduling a Cup date in that area. But once the ISC proposed building a track in that same place, suddenly that land was all but guaranteed an event before a shovel dug into the ground. That commitment was intended to help leverage state governments into bankrolling a portion of the costs of building the track. At least this time – perhaps wisened by the Homestead debacle – the local politicians told the ISC to tape a flying flip at a doughnut, with the voters loudly repeating that offer.

But for some reason the right, honorable District Judge William O. Bertelsman didn’t see a conflict of interest in the incestuous relationship between the ISC and NASCAR. A cynic might think that Hiz Honor will now be dumping a few cubic acres of cash into his basement for administering Bubba Justice Southern Style, but I have no credible evidence to prove that’s the case. Bertelsman’s argument is that this is a classic case of “producers” and “distributors.” In his ruling, the judge noted:

“A producer of a product is free under current antitrust laws to select its distributors, and to refuse to deal with would-be distributors, no matter how worthy or deserving they may be….”

Now, I’m not a lawyer. There’s one less reason to hate me. But in trying to find an analogy that fits my life, I present this: Let’s say in a given area there are beer sellers (distributors) who sell the big two breweries, Bud and Miller/Coors. These are your distributors, prices are set at a certain level, and everyone makes money. Then, out of nowhere a new, third distributor wants to enter the same market and sell the product cheaper – even though they pay the same for the product. Well, that might upset the apple cart, so the producers decide they will not provide products to the new distributor in order to keep prices high. Without the top selling flavors of beer, the new distributor is now doomed: You could argue the upstart can still get other brands of beer and microbrews, but the fact he can’t get 30-packs of Coors Light and Bud is ultimately going to bankrupt his business. If that’s legal… it shouldn’t be, as it certainly isn’t good for the consumer.

Throughout its history, NASCAR and to an extent the ISC have been the happy recipients of the benevolence of Bubba Justice, backroom style. The fight may not be over; the Kentucky track has the right to appeal today’s decision, and all indications are they will. In response, NASCAR will keep spending millions of dollars to thwart this lawsuit, because it threatens to cost the France family their cozy way of doing business. Even worse, if the suit were ever to reach an open courtroom, NASCAR would be forced to open its accounting books, a possibility they will resist until their last dying corporate breath. If folks were ever to see the obscene profits the France family makes, fans might rise up and stone them in the streets.

My guess is it’s time for Kentucky to move beyond the lawsuit and invite the Federal Trade Commission to take a good look at the relationship between NASCAR and the ISC, as well as how the Cup schedule gets decided. My guess is governmental hearings would finally force the Frances to do what we all know is right: divest themselves either of their holdings in either NASCAR or the ISC to level the playing field for all track owners. At this point, we know this much: if this judge’s ruling is upheld as correct in the eyes of the law, there is no conflict of interest – but to the eyes of logic, the status quo is a shameful monopoly.

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