Antitrust Trial Kicks Off as NASCAR Faces Allegations of Monopoly Power

The highly anticipated antitrust trial pitting 23XI Racing and Front Row Motorsports against NASCAR officially commenced on Monday in Charlotte, North Carolina. The first day of proceedings saw the careful selection of a nine-person jury, compelling opening statements from both the plaintiffs and the defense, and the initial testimony of NASCAR Cup Series driver and 23XI Racing co-owner Denny Hamlin. The trial, expected to last two weeks, centers on claims that NASCAR has engaged in anti-competitive practices, particularly concerning the sport’s charter system, which dictates team participation and revenue sharing.

Lead attorney for the plaintiffs, Jeffrey Kessler, laid out a strategy for the jury, promising to present evidence, including internal emails and text messages, that he contends will demonstrate a deliberate anti-competitive strategy orchestrated by NASCAR leadership, including CEO Jim France. Kessler asserted that executives like Steve Phelps, Steve O’Donnell, and Scott Prime were aware of and complicit in actions that unfairly disadvantaged the teams. He cited a previously revealed text message exchange where Phelps reportedly acknowledged that the proposed charter extension offered teams "zero wins," and O’Donnell allegedly characterized it as a "fuck the teams" offer, a sentiment he suggested would revert NASCAR to its "tiny southern roots" of 1996.

Kessler further argued that the current NASCAR structure, where the France family essentially constitutes the board of directors, allows for a concentration of power that enables the sanctioning body to act as a monopsony – a market where there is only one buyer for a particular good or service. He drew an analogy for the jury, comparing the situation to a nurse needing to accept any wage offered by a single hospital in a town, emphasizing the lack of alternative employment opportunities.

The plaintiffs’ core arguments, as articulated by Kessler, revolve around three key points: that NASCAR’s actions have suppressed team revenues, stifled competition, and diminished the enterprise value of the teams themselves. Specifically, Kessler highlighted that teams sought permanent charters, which would grant them greater equity and stability, but were instead offered extensions. He also stated that teams requested $20 million per car in charter revenue but received $12.5 million, and that their request for veto power over competition changes was not only denied but also resulted in the loss of a "three strikes" provision from the previous charter agreement, which offered teams some degree of influence. Kessler likened the charter system to renting rather than owning a house, where the teams’ investment is not permanently secured, thus limiting their ability to build long-term value. He posited that granting permanent charters would incur "absolutely nothing" for NASCAR but has been resisted by the sanctioning body.

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NASCAR’s defense, presented by attorney John E. Stephenson, countered by framing the lawsuit as an attack on the established charter system, which NASCAR maintains it has honored consistently since its inception in 2016. Stephenson emphasized that the antitrust claims were not raised by 23XI and Front Row until after the charter extension deadline and the issuance of a final offer in September 2024. He pointed to a September 6 letter from 23XI explaining their refusal to sign the agreement, which he stated made no mention of anticompetitive behavior, a sentiment echoed in communications with Front Row.

The defense suggested that 23XI Racing harbored an intention to sue if their desired financial terms were not met, citing an email from 23XI co-owner Curtis Polk that allegedly stated, "A lawsuit is our greatest leverage." Stephenson characterized the teams’ actions as "negotiation through litigation," arguing that their pursuit is for better financial terms rather than a genuine effort to rectify antitrust wrongs. He presented further emails from Polk in 2023 expressing "admiration" for the France family’s business acumen and making no reference to anticompetitive behavior, questioning why 23XI would continue to purchase charters if they were truly a product of anticompetitive practices and a "bad deal."

Regarding the non-compete clauses that teams must agree to, Stephenson drew a parallel to similar clauses signed by drivers. He described the provision prohibiting teams from competing against NASCAR as a trade-off for guaranteed revenue, arguing it signifies a commitment to NASCAR stock car racing. He also addressed NASCAR’s merger with International Speedway Corporation, stating it was for "schedule flexibility" and "innovation," enabling risk-taking for events like the Chicago Street Race, which a publicly traded entity might not undertake. Stephenson repeatedly questioned the necessity of the trial, suggesting Polk had a pre-meditated plan to litigate if charter terms were not met.

The first day concluded with approximately 40 minutes of testimony from Denny Hamlin. Under questioning from his attorney, Jeanifer Parsigian, Hamlin discussed his responsibilities as a co-owner of 23XI Racing, focusing on competition and sponsorship. He repeatedly highlighted the challenge of securing sponsorships, stating that potential sponsors are often pursued by NASCAR itself, forcing him to compete with the sanctioning body for partnerships and employees. He also touched upon the significant financial outlay required to operate a Cup Series team, estimating the cost to be $20 million per car, with the charter agreement covering $12.5 million, leaving the remainder to be funded through sponsorships. Hamlin noted that 23XI’s profitability is partly attributable to co-owner Michael Jordan’s involvement, which makes the team more attractive to sponsors.

Hamlin expressed his view that the current charter agreement is unfair, citing the fact that 11 of the original 19 charter teams from 2016 have ceased operations. "If the terms were fair, they wouldn’t have gone out of business," he stated. He also pointed to factors outside of the teams’ control, such as mid-season rule updates and international races, which can significantly impact a team’s financial performance. Anecdotally, Hamlin revealed that 23XI pays Joe Gibbs Racing $2.66 million per car per season for an alliance fee, underscoring the operational costs and the need for lean management, as requested by his business partners.

The day’s proceedings began with jury selection, a process that took just over two hours to seat six men and three women. Potential jurors were questioned by Judge Kenneth D. Bell, Kessler, and Stephenson. Several candidates were dismissed, including one who worked for Hendrick Automotive Group and another who demonstrated extensive knowledge of NASCAR and the parties involved. Two candidates were dismissed for expressing strong pre-existing opinions about Michael Jordan. The judge also made a stern remark to a candidate who had joked about "heavy drinking" on his questionnaire, though that individual ultimately made it onto the jury.

Earlier in the day, Judge Bell ruled on a NASCAR motion to limit the presence of 23XI owners in the courtroom to a single representative to hear all testimony. While initially reluctant, the judge granted the motion to avoid potential grounds for a mistrial, designating one owner to attend all proceedings. Denny Hamlin, as the first witness, will be permitted to remain in the courtroom after his testimony concludes. Curtis Polk, another key figure, will also be allowed to join them once his own testimony is complete.

The potential witness lists presented on Monday included prominent figures from both sides. NASCAR’s list includes Jim France, Lesa France Kennedy, Ben Kennedy, Steve O’Donnell, Steve Phelps, and Scott Prime, among others. The teams’ list features Richard Childress, Rick Hendrick, Roger Penske, Heather Gibbs, Cal Wells III, and Steve Newmark.

The trial is scheduled to resume on Tuesday morning, with cross-examination of Denny Hamlin by NASCAR’s legal team. The proceedings are expected to delve deeper into the financial structures, contractual agreements, and alleged monopolistic practices that have brought two of NASCAR’s prominent teams into direct legal conflict with the sport’s governing body.

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