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Is The Revenue Allocation Scheme Of Formula One Motor Racing A Case For European Competition Policy?

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  • Oliver Budzinski
  • Anika Müller‐Kock

Abstract

Recent allegations from participants of the FIA Formula One World Championship (F1) suggest that its authorities violate European competition law in two ways. First, they allegedly abuse market power by forcing unfavorable contracts on media revenue allocation upon teams as a whole and on smaller teams in particular (vertical allocation of media revenue). Second, they allegedly form a cartel with selected teams to the detriment of smaller teams by providing unjustified extra payments to these teams (horizontal allocation of media revenues). In doing so, the cartel members allegedly secure supracompetitive rents from the authorities and cement an unfair competitive advantage over the outsider teams. Employing concentration measures from empirical economics, we present an assessment of whether the current antitrust allegations against F1 may be considered valid or not. We show that the allocation scheme employed in F1 considerably differs from those in other professional sports championships. We find the empirical picture to be consistent with an anticompetitive interpretation of F1 media revenue structures and policies. We conclude that there is merit in initiating an in‐depth antitrust investigation of Formula One motor racing. (JEL K21, L12, L40, L83, Z20)

Suggested Citation

  • Oliver Budzinski & Anika Müller‐Kock, 2018. "Is The Revenue Allocation Scheme Of Formula One Motor Racing A Case For European Competition Policy?," Contemporary Economic Policy, Western Economic Association International, vol. 36(1), pages 215-233, January.
    • Handle: RePEc:bla:coecpo:v:36:y:2018:i:1:p:215-233
    DOI: 10.1111/coep.12247
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    Citations

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    Cited by:

    1. Tomislav Globan & Ed Jägers, 2019. "Multiple Ownership, Collusion And Unusual Result Patterns In Soccer," Contemporary Economic Policy, Western Economic Association International, vol. 37(2), pages 245-260, April.
    2. Budzinski, Oliver, 2017. "Four cases in sports competition policy: Baseball, judo, football, and motor racing," Ilmenau Economics Discussion Papers 109, Ilmenau University of Technology, Institute of Economics.
    3. Rocaboy Yvon, 2023. "Inter-league Competition and the Optimal Broadcasting Revenue-Sharing Rule," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(2), pages 723-756, June.
    4. Oliver Budzinski & Arne Feddersen, 2020. "Measuring competitive balance in Formula One racing," Chapters, in: Plácido Rodríguez & Stefan Kesenne & Brad R. Humphreys (ed.), Outcome Uncertainty in Sporting Events, chapter 1, pages 5-26, Edward Elgar Publishing.
    5. D'ora Gr'eta Petr'oczy & L'aszl'o Csat'o, 2019. "Revenue allocation in Formula One: a pairwise comparison approach," Papers 1909.12931, arXiv.org, revised Dec 2020.
    6. repec:beo:swcetp:23-12 is not listed on IDEAS
    7. Budzinski, Oliver & Gänßle, Sophia & Kunz-Kaltenhäuser, Philipp, 2019. "How does online streaming affect antitrust remedies to centralized marketing? The case of European football broadcasting rights," Ilmenau Economics Discussion Papers 128, Ilmenau University of Technology, Institute of Economics.
    8. Georgios Nalbantis & Tim Pawlowski, 2019. "U.S. Demand for European Soccer Telecasts: A Between-Country Test of the Uncertainty of Outcome Hypothesis," Journal of Sports Economics, , vol. 20(6), pages 797-818, August.
    9. Budzinski, Oliver, 2023. "(Sports) economics upside down? A comment on the Advocate General opinion in European Super League versus UEFA/FIFA," Ilmenau Economics Discussion Papers 173, Ilmenau University of Technology, Institute of Economics.
    10. Budzinski, Oliver & Feddersen, Arne, 2022. "Should organizing premier-level European football be a monopoly? And who should run it? - An economists' perspective," Ilmenau Economics Discussion Papers 166, Ilmenau University of Technology, Institute of Economics.
    11. Budzinski, Oliver & Feddersen, Arne & Kunz-Kaltenhäuser, Philipp, 2023. "Zwischen Wettbewerbsorganisation und Wettbewerbsverzerrungen - Regelsetzungen durch europäische Fußballverbände," Ilmenau Economics Discussion Papers 174, Ilmenau University of Technology, Institute of Economics.
    12. Dejan Trifunović & Bojan Ristić, 2023. "The Impact Of The Horizontal Distribution Of Media Rights Revenues In Sports Leagues On Competitive Balance," Shaping Post-COVID World – Challenges for Economic Theory and Policy, in: Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.),Shaping Post-COVID World – Challenges for Economic Theory and Policy, chapter 12, pages 263-285, Faculty of Economics and Business, University of Belgrade.
    13. Budzinski, Oliver, 2024. "Financial regulation in sport championships as an anticompetitive institution," Ilmenau Economics Discussion Papers 187, Ilmenau University of Technology, Institute of Economics.

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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z20 - Other Special Topics - - Sports Economics - - - General

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