Jordan v. NASCAR: Sporting Worlds Collide

On Wednesday, October 2, 2024, basketball legend Micheal Jordan “accused NASCAR of being a monopoly in a joint antitrust lawsuit . . . .”[1] Jordan is currently the co-owner of 23XI Racing, a professional auto racing organization that competes in the NASCAR Cup Series. The company is also co-owned by Denny Hamlin, current Joe Gibbs Racing driver and three-time Daytona 500 winner.[2] Specifically, Jordan, Hamlin, as well as Front Row Motorsports – a professional stockcar racing team – have alleged that NASCAR and its CEO Jim France “have used ‘anticompetitive and exclusionary practices’ to ‘enrich themselves at the expense of the premier stock car racing teams.’”[3] Importantly, one must note that it took a billionaire (i.e., Jordan) to even have the funds to challenge France and NASCAR (i.e., it surely seems like such a lawsuit is going to be a long and expensive road that only an individual of Jordan’s financial status would be able to endure).

The “anticompetitive and exclusionary practices” that Jordan and company allege relate to “NASCAR’s so-called ‘charter system,’ which is similar to franchises for race teams. Holding a charter guarantees a starting spot in all 36 NASCAR Cup Series points races, and charter teams earn a share of the $1.1 billion per year in television money NASCAR will collect from a new TV deal starting next year.”[4] Jordan’s lawsuit alleges that France and NASCAR have violated both Section 1 and Section 2 of the Sherman Antitrust Act of 1890.

Section 1 of the Sherman Act “prohibits competing businesses from unreasonably restraining competition in a relevant market.”[5] As previously mentioned, Jordan and company allege that France and NASCAR “conspired with co-conspirators to negotiate exclusive contracts for sanctioning rights to host Cup Series races.”[6] Additionally, Jordan’s lawsuit accuses France and NASCAR of imposing “‘unlawful exclusive dealing provisions terms’ on owners of racetracks as a condition of being able to host Cup Series events.”[7] Jordan’s complaint alleges: “the exclusive dealing provisions contractually block racetrack owners from hosting other events, [which] diminish[e]s professional opportunities for teams and constrain[s] the [relevant] racing market [in the United States].”[8] (emphasis added).

Section 2 of the Sherman Act pertains to prohibiting “illegal monopolies, as well as illegal monopsonies . . . .”[9] Importantly, monopsonies “are like monopolies except instead of having too much control over the sale of a good or service, the defendant is accused of having too much control over the buying of goods and services . . . .”[10] (emphasis added). Here,  Jordan and company allege that France and NASCAR are operating an illegal monopsony by having too much control over “the buying of the services of premier stock car racing teams [i.e., NASCAR is accused of obtaining monopsony power by becoming the only premier stock car racing series in the United States].”[11] Finally, Jordan’s lawsuit alleges that “NASCAR has allegedly used exclusionary contract provisions to suppress competition and compel leading stock car racing teams to accept onerous terms.”[12]

Unfortunately, the many problems which have led to this lawsuit are not new for the racing world. Specifically, “[t]eams have been trying to negotiate an extension of the original 2016 charter agreement for more than two years before it expires on December 31, but NASCAR refused to give teams many of the concessions they sought — including making the charters permanent.”[13] (emphasis added). Therefore, the crux of Jordan’s current lawsuit is once again violations of both Sections 1 and 2 of the Sherman Act (i.e., “if enough teams did not sign [the charter] by a midnight deadline, NASCAR threatened to ‘eliminate the charter system altogether for 2025 and beyond’”).[14]

Currently, 23XI (i.e., Jordan and Hamlin) and Front Row have declined to sign the proposed charter, which has made them the only two holdouts among the current 15 charter organizations. Both company’s “stand to lose their four combined charters entirely if the legal situation does not play out in their favor, and the charters have sold for as much as $40 million.”[15] Jordan and company claim that “while even the winningest organizations struggle to break even, NASCAR has unlawfully blocked the formation or growth of any other series — thus forcing competitors ‘to accept take-it-or-leave-it economic conditions’ in order to participate.”[16] (emphasis added). Examples of NASCAR’s illegal “take-it-or-leave-it economic conditions,” which violate the Sherman Act include:

1. Purchasing a majority of the country’s top racetracks and giving NASCAR exclusivity in those venues;
2. Forcing other NASCAR-sanctioned racetracks to abide by exclusivity agreements;
3. Purchasing NASCAR’s “only other recognizable stock car racing series competitor” (ARCA) in 2018;
4. Prohibiting Cup teams from participating in any other stock car races; and
5. Choosing the exclusive third-party vendors to sell cars and parts to race teams while retaining ownership of all cars and parts.[17]

Under antitrust law, Jordan and company “seek treble damages for [the] anticompetitive terms that have ruled the sport since the initial 2016 charter agreement.”[18] When asked to comment on the matter, Jordan gave the following response:

Everyone knows that I have always been a fierce competitor, and that will to win is what drives me and the entire 23XI team each and every week out on the track . . . . I love the sport of racing and the passion of our fans, but the way NASCAR is run today is unfair to teams, drivers, sponsors and fans. Today’s action shows I’m willing to fight for a competitive market where everyone wins.[19]

Thus, only time will tell if the 6-time NBA champ will achieve yet another victory. But in the meantime, the federal court hearing this case will be faced with two important questions:

1. Will a “Per Se” or “Rule of Reason” standard be applied to analyze the potential antitrust violations?[20]
2. Will this NASCAR situation be considered analogous to a “sports league?”[21]  

---

[1] Gluck, Jeff and Bianchi, Jordan, 23XI Racing, Front Row Motorsports sue NASCAR alleging monopolistic practices, The Athletic (October 2, 2024) https://www.nytimes.com/athletic/5810445/2024/10/02/23xi-racing-front-row-nascar-lawsuit/.

[2] Id.

[3] Id.

[4] Id.

[5] McCann, Michael, Michael Jordan’s NASCAR Antitrust Case Could Face Yellow Flags, Sportico (October 3, 2024) https://www.sportico.com/law/analysis/2024/nascar-antitrust-case-defenses-1234799661/.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id.; Relating to NASCAR “suppressing competition,” it is important to note that in 2019, NASCAR acquired International Speedway Corporation for $2 billion. This move gave NASCAR full control over 13 of the country’s premier racetracks, including Daytona International Speedway and Talladega Superspeedway. Hence, one could argue that such a move substantially foreclosed any potential new competitor from being formed.

[13] Supra note 1.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Associated Press, Michael Jordan-led lawsuit says NASCAR, France family are ‘monopolistic bullies,’ ESPN (October 2, 2024) https://www.espn.com/racing/story/_/id/41566828/michael-jordan-led-lawsuit-says-nascar-france-family-monopolistic-bullies.

[19] Id.

[20] A “Per Se” standard to analyze an antitrust violation “requires no further inquiry into the practice’s actual effect on the market or the intentions of those individuals who engaged in the practice.” In contrast, a “Rule of Reason” standard to analyze an antitrust violation “establishes that a business practice is illegal if it unreasonably restricts trade. Courts often find intent and motive relevant in predicting future consequences during a Rule of Reason analysis.” https://www.law.cornell.edu/wex/antitrust_laws#:~:text=The%20Per%20Se%20Rule%20v,the%20Rule%20of%20Reason%3A&text=A%20per%20se%20violation%20requires,Established%20in%20Standard%20Oil%20v.

[21] See Farzin, Leah, On the Antitrust Exemption for Professional Sports in the United States and Europe, Jeffrey S. Moorad Sports Law Journal: Vol. 22: Iss. 1, Article 2 (2015); In the U.S., three of the four major professional sports leagues do not have any general exemption from federal antitrust laws (i.e., basketball, football, and hockey are all subject to antitrust law; baseball is the only exception). Additionally, professional baseball, football, hockey, and basketball are statutorily exempt from US antitrust laws for the purpose of collectively selling the rights to television broadcasts of games. See Sports Broadcasting Act of 1961, 15 U.S.C. §§ 1291-95 (1961). All four major professional sports leagues are also exempt as far as labor relations are concerned (i.e., baseball by statute and the remaining three by the non-statutory labor exemption for collective bargaining agreements).