NASCAR Faces Scrutiny as Teams Allege Financial Disadvantage in Court; Governing Body Mounts Defense

In a courtroom where opposing sides interpret the same financial data through vastly different lenses, the trial concerning allegations of NASCAR’s monopsony power and its impact on Cup Series teams has entered a critical phase. Day 8 of the proceedings saw NASCAR begin its defense, presenting its financial perspective and operational rationale in response to claims brought forth by 23XI Racing and Front Row Motorsports. The core of the dispute centers on whether NASCAR, as the singular purchaser of premier stock car racing teams, has leveraged its market position to financially disadvantage competitors and consequently harm the overall health of the sport.

It is crucial to note that the legal framework of this case does not question NASCAR’s status as a monopoly, which is not inherently illegal. Instead, the U.S. District Court for the Western District of North Carolina has already established that NASCAR operates as a monopsony – a market structure where there is only one buyer for a particular good or service, in this instance, elite stock car racing teams. The jury’s fundamental task is to ascertain if NASCAR has exploited this unique market power to the detriment of team finances and the competitive landscape, particularly through the mechanism of the charter system.

NASCAR’s Chief Financial Officer, Greg Motto, spent nearly two hours on the witness stand, primarily addressing the distribution of $400 million to the France family trust. For tax purposes, NASCAR is structured as a private S Corporation. This designation means that the company’s financial outcomes—including profits, losses, deductions, and credits—are passed directly to its shareholders, who in this case are members of the France-Kennedy family.

Jeffrey Kessler, lead counsel for 23XI and Front Row Motorsports, argued that NASCAR could have allocated $720 million annually for charter payments to teams, a figure significantly higher than the $431 million earmarked for distribution in 2025. Motto, supported by financial expert Mark Zmijewski, countered that such an expenditure would lead to NASCAR’s bankruptcy, a stark contrast to the projections offered by the teams’ financial expert, Dr. Edward Snyder. Kessler has consistently maintained that NASCAR’s financial projections, presented by executives and their experts, assume a static operational model, preserving current salary structures and business practices. He has repeatedly referenced the 2020 season, when the COVID-19 pandemic necessitated across-the-board salary reductions, suggesting that a more equitable distribution of funds would have led to similar adjustments throughout NASCAR’s hierarchy, including compensation for figures like Jim France and track maintenance personnel.

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Kessler further posited that the $544 million sale of a significant portion of the former Auto Club Speedway land could have been directed towards team payments rather than servicing debt incurred from the 2019 International Speedway Corporation merger. He also highlighted that, as an S-Corp, NASCAR is not legally obligated to issue dividend payments to the France family. Motto asserted that NASCAR must fulfill its tax obligations, which inherently necessitates distributions to the France family due to its S-Corp status. Kessler, however, contended that selling company assets like the speedway improved its overall equity by reducing debt. He characterized the financial movements as a transfer of funds within the same familial entity, aiming to minimize tax liabilities for the France family. When confronted with NASCAR’s projected $10 million year-over-year revenue loss in 2025, Kessler dismissed it as a "rounding error" for an organization of NASCAR’s magnitude.

Kessler also cross-examined Professor Zmijewski, arguing that the NASCAR financial expert failed to adequately account for the sanctioning body’s financial records within a hypothetical "but for" scenario where teams would be financially healthier without alleged anticompetitive practices. The day concluded with both sides drawing opposing conclusions from the same financial documentation.

The initial seven and a half days of the trial involved the legal teams for 23XI and Front Row Motorsports presenting their witnesses, followed by NASCAR’s cross-examination and subsequent re-examination. On Wednesday afternoon, the roles reversed, with NASCAR initiating its defense by calling its own witnesses. The first to testify was John Probst, NASCAR’s Senior Vice President of Innovation and Racing Development. Probst primarily discussed the development of the Next Gen car and supported NASCAR’s assertion that teams possess a "reckless" spending problem.

Probst, whose career began in the mid-1990s with Ford Motor Company, leading to his participation in the CART IndyCar Series and later NASCAR with Red Bull Racing and Chip Ganassi Racing before joining NASCAR in 2016, was intended to provide context on historical competitive dynamics. However, attempts to draw parallels with the American Open Wheel Split were met with sustained objections from Judge Kenneth D. Bell, who deemed the line of questioning "out in left field." Probst was permitted to offer a brief overview of the CART-Indy Racing League schism in the 1990s, describing how the IRL initiated its own series, formed its own teams, and collaborated with original equipment manufacturers (OEMs) to expand its grid, ultimately leading to the division of the sport.

Probst also served as an explainer for the jury on the function of wind tunnels and the substantial costs associated with their use, referencing the Laurel Hill Tunnel owned by Ganassi as an example of the investment required. Kessler objected to Probst’s extended discourse on wind tunnel testing history, prompting Judge Bell to urge the prosecution to expedite the proceedings.

Probst explained that the Next Gen car, a single-source parts supply specification vehicle, was conceived with the principle that fan interest primarily centers on manufacturer-specific engines and car bodies. Other components, he argued, were largely invisible to spectators and thus less critical, theoretically reducing the need for teams to invest heavily in wind tunnel testing and proprietary part development. He stated that the concept of the Next Gen car received endorsement from 30 of the 36 charter holders prior to formal development, a process that cost NASCAR $14 million while requiring no direct investment from teams for research and development. Probst cited this broad endorsement as a significant testament to the car’s intended benefits.

NASCAR monitors team part purchases from approved vendors, requesting this data annually or biannually as permitted under the charter agreement. The objective, Probst stated, is to demonstrate that increased part acquisition does not necessarily correlate with on-track success. He pointed to Team Penske as an example of consistent winning with minimal re-purchasing of single-source parts, contrasting this with 23XI Racing’s higher expenditure over the past two years.

Regarding the repair of parts, Probst testified that NASCAR prohibits it, even if teams like Front Row Motorsports might find it more economical to repair rather than repeatedly purchase new components. NASCAR’s stance, he explained, is that "repair" often translates to "modify" and "improve" in a team’s context, which would undermine the parity sought through the Next Gen platform by potentially igniting a costly spending war.

Under cross-examination by Kessler, Probst acknowledged that his clients were not challenging the Next Gen car itself but rather the non-compete restrictions embedded within the charter agreement. Kessler questioned Probst about any studies supporting the restriction of Cup Series cars from other racing leagues as "pro-competitive," leading to a back-and-forth over legal terminology and question clarity.

Internal emails revealed that prior to developing the Next Gen car, NASCAR had considered adapting the previous Gen 6 car platform into a spec series. Probst explained that the rationale for developing an entirely new car, rather than modifying the Gen 6, was to mitigate the risk of a "copycat series," a concern he elaborated on when Kessler inquired about NASCAR’s fears. "We don’t fear competition," Probst responded.

Kessler then highlighted that NASCAR’s implementation of exclusivity clauses coincided with the development of a mid-week summer dirt series by the Race Team Alliance (RTA) and the emergence of the Superstar Racing Experience (SRX) series. While NASCAR’s legal team objected, Judge Bell permitted the assertion. Probst stated that track sanctioning agreements were outside his purview and he could not comment on exclusivity. He likened NASCAR’s brand protection efforts to those of Coca-Cola, arguing that the company would not develop a new recipe and then permit a competitor to replicate it. Probst also asserted that no team had ever requested permission to use a Gen 6 or Next Gen car in a non-NASCAR division. "All they have to do is ask," Probst said, a statement Kessler immediately countered by asserting NASCAR would never permit such usage. Probst responded, "We would discuss it." When asked why NASCAR Commissioner Steve Phelps had suggested "someone needs to put a knife" into the SRX series, Probst deferred, stating Phelps would be the appropriate person to answer.

Kessler presented an internal document detailing an exercise involving NASCAR executives, including Probst, Phelps, Steve O’Donnell, and Scott Prime, tasked with calculating the cost of establishing a Cup Series team from scratch. Probst explained this was an effort to gain a more accurate understanding of competition costs, given that teams often provide misleading or incomplete cost data. Kessler suggested this was part of "Project Gold Codes," NASCAR’s contingency plan to operate the Cup Series internally if teams refused to sign the 2025 charter extension. Probst maintained the exercise was conducted with altruistic intentions. He admitted to contributing to the Gold Codes presentation and using data from the cost study, though he did not solely author the document.

Finally, Kessler questioned Probst about a text message exchange with his chief of staff, Tom Swindell, following the September 6, 2024, charter extension deadline. Swindell’s message, "RIP Project Gold Codes," was met with Probst’s affirmative "YES." Swindell then inquired about the leverage held by 23XI and FRM in their continued opposition, to which Probst responded, "I can’t see any." Kessler aimed to establish Project Gold Codes as more than a contingency, but Probst described the exchange as between personal friends discussing work matters. Kessler concluded his cross-examination, stating, "No further questions, your honor."

France Concludes Testimony Amidst Charter Debate

Following a Tuesday session marked by numerous instances of responding "I do not know" or "I do not remember," Jim France, NASCAR CEO, provided a direct answer regarding his opposition to permanent charters for Cup Series team owners. "I don’t have a sightline to the future, and I don’t feel comfortable making a promise I don’t know if I can keep," France stated. He had been presented with letters from prominent team owners Roger Penske, Rick Hendrick, Joe Gibbs, and Jack Roush, urging him to make ownership statuses "evergreen" – a move that would increase team equity without direct cost to NASCAR. France reiterated his discomfort with making permanent agreements in a constantly evolving world. He indicated that while NASCAR had made concessions on various points, an internal graph presented by Amanda Chart showed 21 wins or neutral outcomes for NASCAR versus one for the teams, he remained firm against permanent charters. When pressed for the certainty he would require, France responded, "Don’t know ’til we get there."

Loose Ends and Scheduling

Judge Bell informed the jury they would be required the following week, with NASCAR indicating an intention to conclude its case by Friday evening. The original schedule projected a 10-day trial over two weeks. The initial slower pace necessitated extending each court day by an hour, pushing closing arguments to Monday morning at the earliest.

A separate matter involved the source of information regarding Richard Childress’s exploration of selling a portion of his Cup Series team to a group led by former driver Bobby Hillin Jr. This information was protected by a non-disclosure agreement, and Childress appeared visibly agitated when NASCAR’s attorney introduced it during his cross-examination. After the jury’s dismissal, team attorney Danielle Williams expressed a desire to question NASCAR on this matter, but Judge Bell deferred, stating both parties needed to reach a resolution before Thursday morning, or he would issue an order. The teams’ legal representatives also expressed concern that NASCAR had not yet provided them with the relevant documents pertaining to this issue.

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