OCTOBER 30, 2001
Formula One and Europe - the war is over
THE European Union Competition Commission investigation into Formula One and the rule-making structure of the FIA is finally over, after seven years of uncertainty.
The investigation began as long ago as 1994 when the FIA asked the Commission for clearance of its rule-making structure. There followed three years when very little seemed to happen and then in 1997 European Competition Commissioner Karel Van Miert had several public clashes with FIA President Max Mosley. Van Miert disappeared in 1999 and was replaced by Italian Mario Monti and progress became much swifter.
As a result of the years of negotiation the FIA has been removed from all commercial activities relating to the sport although it remains the administrative and legislative power. The commercial rights to Formula 1 have been leased for 100 years to the SLEC organization for a one-off payment of $300m. This has enabled the FIA to establish the FIA Foundation for the Automobile and Society. The object of this body is to promote safety on the roads and on the race tracks, to ensure that the environment is properly protected and to research into new areas of automobilism.
The Commission insisted that Formula 1 boss Bernie Ecclestone sell his International Sportsworld Communicators company, which owns the commercial rights to the World Rally Championship, to David Richards and to step down from his various roles within the FIA. As a result of that Ecclestone is no longer a member of the FIA Senate, which oversees the FIA finance, and he is only on the World Motor Sport Council in his role as the representative of the F1 teams.
Although the Ecclestone Family has sold 75% of the SLEC company to Kirch Media, Ecclestone himself remains in control of the business under a shareholders' agreement which runs until the end of 2005. After that control of the commercial side of the business will pass to Kirch which will by then be known as KirchMedia AG and will be a quoted company trading on the Frankfurt Stock Exchange. The listing of Kirch will be achieved next June when Kirch Media is merged with its subsidiary ProSiebenSat.1.
It is worth noting that Max Mosley's term as FIA President runs out at the end of 2005 as well and so the sport will at that point pass into new hands both commercially and politically.
In the interim there still needs to be a settlement between the authorities and the Formula 1 teams as they are not happy with the income they are receiving and are threatening in 2008 to start their own World Championship. The details of who receives what in Formula 1 are closely guarded but we understand that the top 10 F1 teams currently split 47% of the gross TV revenues generated by the sport. They are also believed to receive about 30% of the fees collected from race organizers. They receive none of the money being generated by Allsport Management for trackside advertising and merchandising, supplier programs and corporate hospitality. This money is generated by Allsport itself, which negotiates deals with the individual race organizers. On the other hand the top 10 teams do receive substantial benefits from Ecclestone in terms of transportation bills to get people and materials to all the races.
A new deal is not needed until the end of 2007 but most people in the sport agree that it would be wise that a new Concorde Agreement be negotiated which will keep the sport operating with a common purpose.
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