JANUARY 5, 1998

The FIA and the European Union - Battle No 2

THE European Commission has warned the International Automobile Federation (FIA) that it intends to take action against the existing contracts between the governing body of the sport and Bernie Ecclestone's Formula One Holdings regarding the promotional rights to Grand Prix racing. The EU Competition Directorate, under Belgian Karel Van Miert, has concluded that these are in breach of European anti-trust legislation and must be changed. Van Miert is also reported to be worried that the FIA statutes are not compatible with the EU competition laws.

We understand that the FIA was given a three-week deadline to come up with ways of solving the problems and if it does not the EU will commence official action. Van Miert is also believed to have concluded that Ecclestone's role as FIA Vice-President (Promotional Affairs) is a conflict of interest with his position as head of FOH.

The current Concorde Agreement - which began on January 1, 1997 - gives FOH the commercial rights to F1 for 14Êyears, in exchange for large payments to both the FIA and the F1 teams. The main concern over the deal between Ecclestone and the FIA is believed to be the length of the agreement but Ecclestone wants this to be extended so that he can float FOH on the stock exchange next year. Without a long-term deal for the TV rights to F1 it is unlikely that FOH will be floated.

It remains to be seen how the FIA and Ecclestone will react to the EU warning. It is unlikely that FIA President Max Mosley and Ecclestone will agree to changes without a fight. They may threaten to withdraw Grand Prix from the EU and move the FIA from Paris to Switzerland. This would put the sport beyond European law but would deprive F1 of races in its traditional venues such as San Marino, France, Spain, Britain, Austria, Germany, Belgium, Italy, Luxembourg and Portugal. Such a move is never likely to be more than a threat as the reaction to such a suggestion would put considerable pressure from governments on Van Miert to compromise.

The most likely result is a compromise of some form but that does not mean that we will not be seeing saber-rattling and posturing from both sides, as happened recently over the issue of a Europe-wide tobacco advertising ban.