23XI Racing and Front Row Motorsports sue NASCAR over charter agreement

Two organizations’ disagreements with NASCAR over the 2025 Charter Agreement have escalated into a federal antitrust lawsuit.

23XI Racing and Front Row Motorsports and their lawyers filed a lawsuit Wednesday against NASCAR and CEO Jim France. This comes after 23XI and FRM refused to sign an agreement by a deadline that NASCAR imposed on them last month.

According to the lawsuit, NASCAR sent a “final, take-it-or-leave-it version” of the agreement to the teams “with little warning” on Sept. 6, at 5 p.m. ET. NASCAR allegedly gave them an hour to sign a 100-plus-page agreement or risk not having a charter for 2025.

This caused outrage from the teams. While Jim France and other senior NASCAR leaders allegedly told the teams they’d extend the deadline to midnight, they also allegedly threatened to discontinue the charter system if “a substantial number” of teams didn’t sign by then.

“The teams knew that fielding a NASCAR car had become so expensive that it would be economically devastating for most of them to compete without the stability provided by the charter system and that they would suffer a complete loss of their enterprise values if the charter system was discontinued.”

Why didn’t 23XI and FRM sign on? They allege a provision required signatories to release any legal claims against NASCAR and France, in regard to “anticompetitive terms” of the agreement. They argue this violates U.S. antitrust law.

In March, a negotiating committee of the teams presented NASCAR with these core proposals for a charter renewal:

• Fairer economic split of revenues for teams
• Permanent charters
• Shared governance over matters impacting team investment requirements
• Team control over its intellectual property
• Changing of covenants not to compete.

Upon this happening, the lawsuit alleges NASCAR backed out of negotiations. Instead, they allegedly insisted that teams negotiate with them individually. When the “take-it-or-leave-it” agreement came, it allegedly went against all of those core proposals.

“It seized control over team intellectual property rights, to be used for NASCAR’s benefit… And it also imposed terms that would undermine the relationship between teams and drivers.”

According to the lawsuit, most of the teams believed that they had to sign. One team owner — not named for fear of retribution — allegedly “described NASCAR’s tactics as that of a ‘Communist regime’.” Other unidentified owners allegedly described signing the agreement as:

• ‘Coerced’
• ‘Under duress’
• “NASCAR ‘put a gun to our head [s]’ and ‘we had to sign'”

NASCAR is accused of forming a monopoly and ensuring teams can’t go anywhere else, using its:

• Cars – Next Gen car and its single-source parts

“Teams are limited to 7 cars (per car number) at a time, and NASCAR and the chassis supplier — not the team — get to decide if a chassis can be repaired or must be replaced in the event of a crash… Each Next Gen car remains property of NASCAR.”

• Tracks – Purchasing International Speedway Corporation in 2019; NASCAR executives Jim France and Lesa France Kennedy being executives at ISC
• Acquisitions of other series – Purchasing ARCA in 2018

As well as terms of agreements with tracks, restricting them from hosting other stock car series.

“Any track owner wishing to host a Cup Series race must sign a NASCAR sanction agreement. These agreements contain an exclusivity provision that prohibits the racetrack from hosting any other stock car racing event that may resemble NASCAR’s racing product.”¹

And teams, restricting their competition in other stock car series:

“To further protect NASCAR’s monopsony power, the 2025 Charter Agreement expanded the scope of the non-compete provision in the 2016 Charter Agreement. While teams used to be prohibited from participating in any professional “stock car racing” other than NASCAR, teams with 2025 Charter Agreements are now prohibited from participating in any “automobile or truck racing” series not sanctioned by NASCAR.”

The organizations clarified that they want to remain committed to the sport.

In the lawsuit, it’s revealed that 23XI Racing agreed Aug. 7 to buy a charter from Stewart-Haas Racing. The agreement is still in escrow and requires NASCAR approval. SHR, as a company, also signed the 2025 agreement “in the interim.”

However, the organizations want to ensure the sport operates on what they describe as fairer business practices. They compared other deals in sports to NASCAR:

“Further, while teams in other major professional sports in the United States, like the NFL and the NBA, share all their national television revenues at the league level equally, the 2016 Charter Agreements shared a very modest percentage of these revenues with the chartered teams… The 2016 Charter Agreements paid “pooled” money to the chartered teams of approximately 37% of broadcast revenues.”

23XI Racing and Front Row Motorsports are seeking an injunction. They want to be allowed them to “accept and operate under the 2025 Charter Agreement” but without adhering to the antitrust stipulation.

In asking for this, the organizations note that the alternative is having to enter as an open team. They state that would require “tens of millions of dollars in investment.” They add that could present “the substantial threat of eventually being driven out of business entirely.”

The lawsuit states that it costs “approximately $3 million in car parts” for a chartered team to run full-time. It’s also revealed that “it costs approximately $18 million per year to run one chartered team” full-time. That is not including driver’s salary, according to the lawsuit.

“And the alternative of competing without a charter would cause even greater economic injury to Plaintiffs and would likely eventually cause them to cease competing at all, as competing without a charter is not economically viable in the long run given the NASCAR requirements, which require tens of millions of dollars in investment.”

The two organizations are also seeking “permanent injunctive relief.” They hope to “end NASCAR’s exclusionary practices and restore competition in the relevant market.”

They’re also seeking money for alleged damages incurred, and soon to be incurred, by “the anticompetitive, below market terms of the 2016 Charter Agreement” and “the 2025 Charter Agreement.”

Winston & Strawn LLP is representing 23XI Racing and Front Row Motorsports.

1. “In recognition of the importance and stature of the Event and the Series, the financial significance of agreements with NASCAR Rights Affiliates, and the sanction granted under this Agreement, during the Term of this Agreement, PROMOTER covenants not to promote, host, conduct or stage, nor allow any third party(s) to promote, host, conduct or stage, a stock car racing event at the Facility that attempts to duplicate, emulate, imitate, copy, simulate and/or mimic the NASCAR National Series; or uses the same or similar race vehicles, rules, competitors, trademarks, trade dress, and/or ‘look and feel’ of the NASCAR National Series; or would create confusion in the public; or would in any way dilute the stature, impact and value of the NASCAR National Series, NASCAR, NEM, NASCAR Rights Affiliates and others.” _{Referring to a Securities and Exchanges Commission From from Dover Motorsports on June 2, 2020.} ↩︎