Kessler Joins NASCAR Team Negotiation in Sign of Antitrust Action
There are few attorneys whose involvement in a dispute is newsworthy, but Jeffrey Kessler is no ordinary attorney.
He’s basically the Michael Jordan of sports litigation and the go-to lawyer for sports labor and antitrust disputes.
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The Winston & Strawn partner who famously secured a 9-0 victory at the U.S. Supreme Court in NCAA v. Alston (2021) has been retained by NASCAR teams as they and NASCAR negotiate a new charter agreement. Kessler’s addition was reported by the Associated Press on Sunday.
Over the years, Kessler has led litigations on behalf of leading figures in sports, including Tom Brady, the NFLPA, U.S. Women’s National Soccer Team and the NBPA. Kessler is currently advocating for college athletes in Carter v. NCAA and In Re College Athlete Litigation (also known as House v. NCAA). In these cases the NCAA and Power Five conferences are accused of violating antitrust law by conspiring to limit college athlete compensation.
Kessler’s addition signals NASCAR teams are exploring potential litigation options—and, by implication, functions as a warning to NASCAR that it should compromise.
NASCAR and the Race Team Alliance, an association of team owners, have been negotiating a new charter agreement, as the current one will expire at the end of 2024. Their existing system promotes a league-like model wherein NASCAR grants charters, which guarantees a starting position, to 36 team owners. In exchange, teams agree to not race in other circuits. There are also four “open” positions for non-chartered teams to compete in 40-car fields.
As Sportico detailed last week, the negotiations haven’t been fruitful. An exclusive negotiating window to extend the charter system expired last month. Unless the parties find an amicable solution by the end of the year, NASCAR could adopt a new system for the eligibility of teams, the distribution of revenue and the sharing of costs that sparks major changes in the sport’s economics.
NASCAR and owners disagree about money and the structure of charters. Although a charter reportedly generates about $9 million a year, some owners contend the figure is inadequate to cover their operating costs. Another source of contention is NASCAR’s new seven-year, $7.7 billion media rights deal, which will pay about 34% more. Owners believe they should get more money.
Enter Kessler.
The charter system, or whatever might replace it next year, could face an antitrust challenge. Unlike legal controversies involving the NFL and its players, there is no collective bargaining agreement for NASCAR and teams. There is therefore no application of the non-statutory labor exemption, which immunizes collectively bargained rules for wages, hours and other working conditions from antitrust scrutiny. Although NASCAR teams have formed an association for purposes of negotiating with NASCAR, it is not a union.
Potential antitrust issues center on NASCAR controlling (to some degree) the market of teams’ and racers’ competition. NASCAR determines which teams are eligible to compete in races and structures how much teams—and their employees—can earn. Teams that are denied access to a charter could argue their exclusion harms competition, which in turn limits opportunities for winnings and accompanying revenues via sponsorships. Teams could insist that as a sanctioning body, NASCAR has too much control over stock car racing and operates as a monopoly. Racing fans and consumers, meanwhile, might be “harmed” if they’re unable to watch the best races on account of the charter system.
NASCAR would be armed with several defenses. For starters, NASCAR has previously defeated antitrust claims that its business model constitutes an illegal monopoly under Section 2 of the Sherman Act. In 2009, the U.S. Court of Appeals for the Sixth Circuit sided with NASCAR over a speedway that claimed NASCAR used its control to unlawfully prevent the speedway from hosting the Sprint Cup. The Sixth Circuit suggested the aggrieved speedway was simply a “jilted distributor” who NASCAR bypassed.
NASCAR could also raise the single entity defense to assert it isn’t subject to claims of unlawfully conspiring with competitors. NASCAR is owned by the France family. To the extent NASCAR acts on its own, it is not engaged in concerted action, which Section 1 of the Sherman Act targets. A single entity can’t conspire with itself and is thus exempt from Section 1 claims.
The analysis is complicated, however, by the fact that NASCAR teams are independently owned. To the extent those teams negotiate with NASCAR to restrict economic competition, the single entity defense is less likely to apply. This is particularly true on account of the NFL losing American Needle v. NFL, a U.S. Supreme Court decision from 2009 where the Court, in a 9-0 decision, held the NFL and its independently-owned teams are not a single entity for purposes of intellectual property licensing and apparel sales.
Even without the single entity defense, NASCAR could argue the charter system promotes, rather than suppresses, competition. The system is intended to reward teams that are productive and have an established record of success. Teams are also held to a minimum performance standard.
Further indicative of a competitive model, NASCAR shares control of charters with owners, who can sell or lease them on the open market. Charters presumably increase the value of teams since the charter itself is an asset. Charters also enable teams to guarantee to their sponsors they will participate in races—which arguably makes the sponsorship market more stable and lucrative. There might also be contractual language in charters that limit or preclude the owners from raising certain types of legal claims in court, or that compels owners to first turn to mediation or arbitration.
NASCAR could reasonably believe it would prevail in an antitrust lawsuit—even one brought by Kessler. But a new system of charters (or whatever might replace it) could prove more vulnerable.
Kessler’s arrival might not presage an antitrust battle, but if owners go down that path, they’ll be led by an attorney who would command NASCAR’s attention.
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